Proceedings of the Standing Senate Committee on
Transport and Communications

Issue 17 - Evidence

OTTAWA, Wednesday, June 7, 2000

The Standing Senate Committee on Transport and Communications, to which was referred Bill C-26, to amend the Canada Transportation Act, the Competition Act, the Competition Tribunal Act and the Air Canada Public Participation Act and to amend another act in consequence, met this day at 5:30 p.m. to give consideration to the bill.

Senator Lise Bacon (Chairman) in the Chair.

[English]

The Chairman: Honourable senators, I see a quorum. Our first witnesses are Mr. Bob Davis, President of First Air, and Mr. Daryl Smith, President of Pacific Coastal Airlines Ltd. Welcome, gentlemen, to our committee. Please proceed.

Mr. Daryl Smith, Chief Executive Officer, Pacific Coastal Airlines Ltd.: Madam Chair, I thank the committee for this opportunity. I am here on a matter of current vital importance not only to Pacific Coastal Airlines but to the travelling public, in particular the travelling public in British Columbia.

I have been a pilot and an airline owner for 36 years. Three of my sons are also active in the management of my company. My son Quentin has been president for the past two years.

Pacific Coastal Airlines in its present form was founded in 1987, following a merger with Powell Air Ltd. and the Port Hardy division of Air B.C. These two companies have flown the British Columbia coast for over 40 years. At present, Pacific Coastal Airlines serves 11 major communities with regular scheduled service in British Columbia, as well as 40 to 50 flag stops. We operate 26 aircraft. We employ 270 to 300 people, depending on the season.

Effective November 1, 1997, Pacific Coastal Airlines entered into an agreement with Canadian Airlines. We became a Canadian partner and took on the carriage of mail, freight and passengers for Canadian between Nanaimo and Vancouver. Later this was expanded to include Comox and Campbell River. We purchased three aircraft, took over some of Canadian's employees and the arrangement worked well for everyone. We had the CP code, and we carried flow-through passengers, as well as those travelling between the scheduled points. Our agreement was to carry on for one-year periods to be renewed automatically unless terminated on 120 days' notice prior to the renewal date, which was October 31.

On February 4, Canadian wrote us to advise us that the agreement was being terminated as of April 2. Some talks with Canadian and Air Canada took place. Canadian then told us they could do nothing. Air Canada just said that they were not really involved. We pointed out to them that the notice was wrong and that they could not end the agreement until October 31 at the earliest.

It is clear, Madam Chairman, that Air Canada precipitated the breach of contract, and left us without the CP code and any flow-through passengers. Before April 2, two airlines competed on the Vancouver Island routes, both of them offering full code-share benefits to the public.

After April 2, Air Canada's partner, Air B.C., was the only air carrier flying between the main terminal in Vancouver International Airport and Comox, Campbell River and Nanaimo. Flow-through passengers who had booked on Canadian became passengers of Air Canada. They had no choice. Air Canada took advantage of its new monopoly position to deprive the travelling public of competition on these routes. Air Canada had been a competitor on those routes but, as of April 2, by an unlawful act, it became effectively the sole carrier. There was no competition.

This committee is examining Bill C-26 which is intended to prevent monopoly abuse in the airline industry. I am here to tell you that that abuse exists. Unless there is political will to see the law enforced, the abuse will continue. We are left with our three aircraft -- which we purchased for the purpose of operating those routes -- and our employees. At a meeting, we were told by a representative of Air Canada: "I guess you will have to sell some aircraft and if we, Air Canada, had all the market to ourselves, we could do very well." My response to them was that we bought the aircraft for these routes and that we would maintain them on the routes with or without the flow-through passengers. However, 82 per cent of all passengers are flow through. That means they connect in Vancouver and continue on a code-sharing airline beyond Vancouver. Separate fares to Vancouver from the Island are so much higher that we cannot hope to compete for the 82 per cent of the business that is flow through. At present, we are carrying on a no-frills business from the small south terminal of Vancouver International Airport. We have to bus the passengers to the main terminal at our expense. In effect, we have been allowed to compete for 18 per cent of the market.

From October 1999 until today, the Minister of Transport has repeatedly promised that the government will not tolerate anti-competitive behaviour. What happened to Pacific Coastal Airlines is "Exhibit A" in anti-competitive predatory behaviour. The Minister of Transport promised to prevent the very monopolistic conduct of Air Canada that took place. The minister made the following statements:

The government is committed to fostering as much competition in the airline industry as possible.

While energetic competition is to be encouraged, predatory behaviour cannot be tolerated.

The government will ensure that there are effective measures put in place for dealing with predatory behaviour in the airline industry.

Regardless of how things evolve, however, the government is intent on ensuring that the public interest remains paramount and is protected.

The government's response was that it agreed with the intent of the recommendation of the House of Commons standing committee which noted that the current Competition Act contains provisions to address some types of predatory behaviour. The response included an undertaking to strengthen the act and the result, honourable senators, is, of course, the bill before you.

There is no question but Air Canada is guilty of predatory behaviour and anti-competitive acts against Pacific Coastal. What Air Canada has done is a flagrant act of defiance of everything that it was intended to prevent, and places that airline in a confrontation position with this committee, the standing committee, the House of Commons, the Minister of Transport and the government as a whole.

The Canadian public was promised it could expect protection against the Air Canada monopoly. Obviously, Robert Milton is not getting the message.

The Canadian travelling public should know what they are facing now and will face in the future. Airline restructuring with only one dominant airline code remaining in Canada and an Air Canada monopoly flies in the face of the purpose of the existing Competition Act. We cannot take lightly the vulnerability of others to the monopolistic powers that Air Canada has. It is clear that Air Canada has acted beyond the bounds of the existing Competition Act, the law and government intentions, together with the spirit of the restructuring policy. When we examine the conduct of Air Canada, there is a defiance of what the government is seeking to achieve by the passage of Bill C-26.

The details and intended impact of the amendment to apply the definition of "anti-competitive act" includes the conduct of air carriers who are well known to you. In essence, the government intends to provide the bureau with strengthened legislation so that it can do its job. The public has been told it can rely on the Competition Bureau. The government is counting on the bureau to ensure that as much of the purpose of the Competition Act as possible will be maintained.

The conduct of Air Canada in wrongfully breaching or inducing the breach of the agreement regarding the Vancouver-Comox and the Nanaimo-Campbell River routes operated by Pacific Coastal and then carrying on with the operation of those very routes is an anti-competitive act and against the purpose of the act, either before or after its amendment by Bill C-26. We instructed our lawyer to meet with representatives of the Competition Bureau to find out if the bureau would do anything about Air Canada's wrongful act. The meeting of May 17, 2000, at the bureau's offices was attended by Mr. David Humphreys, our Ottawa public affairs representative; Mr. Richard Elliott, Mr. Richard Annan; and by our lawyer Mr. Kenneth Regier. It soon became clear to Mr. Regier that there was no such interest. The bureau's representatives were rejecting and side-stepping the issue, which was that there was an anti-competitive act as defined in the act and predatory behaviour as interpreted by the Minister of Transport and the Standing Committee on Transport. I now share the comments contained in an editorial that appeared in May 17, 2000 edition of the Financial Post which stated in part that:

Past failures to adequately police predatory pricing are not related to the weakness in the Competition Act itself. Rather, the Competition Bureau has failed over the past two decades to bring cases against predatory behaviour before the Competition Tribunal under existing legislation.

It went on to state:

In fact, a lack of enforcement -- not weakness in the legislation -- hinders actions against predatory practices.

These comments accurately describe today's bureau. When it was determined that the bureau would do nothing, its representatives were asked if they would at least call or write Air Canada, but even that was denied.

We support Bill C-26, but only in the context of some entity actually enforcing the bill's intent after it becomes law. In your deliberations I would urge you to consider the practical manner of enforcement. Perhaps you would consider another board or agency, or even the Department of Justice.

I suggest you broaden your study to investigate for yourselves an actual example of predatory behaviour and an anti-competitive act. Ask why Air Canada forced a breach of contract and knocked an airline off the routes it was flying so the travelling public would have no meaningful choice. Better still, ask the board of Air Canada why the directors allowed this to happen.

I believe that the work of the government in trying to protect the consumer and companies such as Pacific Coastal Airlines is a credit to Canada as a whole. It is our hope that these intentions will be honoured by action.

The Chairman: Thank you, Mr. Smith.

Mr. Davis, would you proceed, please?

Mr. Bob Davis, President, First Air: Thank you for the opportunity to appear before you on this important issue of the proposed legislation concerning airline industry restructuring. Owned 100 per cent by the Inuit of Nunavik, First Air is both Canada's largest aboriginal-owned airline and the largest northern scheduled air carrier. Employing over 1,000 people, many of whom live and work in Canada's North, First Air provides essential air services to 26 remote communities, most of which are not accessible by any other mode of transportation. Scheduled air service in the North is a necessity, certainly not a luxury.

Considering the operating territory of First Air, the focus of our attention is to protect the interests of the northern aviation industry and our stakeholders from what can certainly be characterized as a southern airline industry restructuring process.

It is our understanding that the proposed legislation was developed primarily to protect the public interest in light of a new dominant airline emerging from the restructuring process. While the legislation may have been intended to be straightforward, it includes many complex issues, and unnecessarily impacts almost every airline in Canada.

We do not oppose new legislation. However, we also believe the North deserves special consideration, given the essential nature of air services throughout the region. First and foremost, the new legislation must ensure that a level playing field for competitive activity is maintained such that consumer demand and competitive business control the market and not this legislation.

Time does not permit us to discuss all of the topics we would like to raise today, but I will outline several of our key points.

First, I will deal with the proposed amendment to section 66 concerning unreasonable fares. The proposed amendments on the review of fares complicate further an already undefined and subjective review process. Our company is one of the few airlines in Canada that has gone through a passenger fare complaint review under the existing legislation. Although we received a favourable ruling on our fares, it was clear from this first-hand experience that, with no defined process, no rules regarding confidentiality, no objective decision criteria, none of the parties involved -- that is, neither the complainant, the Canadian Transportation Agency, nor ourselves -- was satisfied with the process. Please remember that this unproductive exercise was carried out under existing legislation and reviewing only a single fare type.

It is now proposed that the agency not only respond to complaints but also initiate investigations on its own and review all passenger fare and cargo rates -- all still without a defined process or list of specific information and format to be supplied in order to conduct such review. Air carriers offer a multitude of fare ranges, seat sales and seat allocations that are in constant flux to meet market demands. As a result, a much more complex fare review process will be necessary. With this increasing complexity will come more uncertainty on many aspects of air carrier pricing, record keeping and retention, and complaint response requirements.

We believe it is incumbent upon the agency to provide clear and concise guidelines prior to this legislation being passed into law on how it proposes the practical use of this broad range of new powers.

Our recommendation on passenger fares is that clause 4, as it deals with section 66, should be amended to ensure that review criteria contemplated remain restricted to basic fares only. The agency must also provide a clearly defined review process and information required for all basic fare investigations. Furthermore, the agency powers should be reduced to complaint response only.

Second, I will deal with the proposed amendment to section 66 as it relates to cargo rates. Making cargo rates subject to review under this clause is untenable. How, possibly, does the government expect the agency to conduct a consistent review or comparison model on our company's cargo rates when over 90 per cent of our cargo is unidirectional, that is, full airplanes northbound and empty airplanes southbound.

We operate four types of aircraft that are capable of being configured in over 38 different passenger and cargo arrangements. These arrangements are routinely reconfigured en route and on multi-stop, turboprop routes.

There is also no evidence that monopoly cargo markets exist in Canada to any great extent and competition, especially in our markets, remains at vicious levels where those markets can support more than one carrier and even those that do not. Our recommendation is that clause 4 as it relates to section 66 should be amended to remove all reference to cargo rates.

Third, I will deal with clause 3 which amends section 64 concerning the discontinuance of service. While in general we support the position presented to you earlier by our industry representative, the Air Transport Association of Canada, we feel the northern environment requires some special attention. Freedom to compete and target-specific routes on a seasonal basis or otherwise in a southern market may be fine where you have a sizeable market where you can stimulate new traffic. WestJet is a master of this concept and should have the flexibility to continue to do so. However, northern markets are thin and remote. In order to survive, one must find the right balance of frequency, passenger-cargo mix, network pattern and so on. Our experience has demonstrated that subjecting individual smaller markets to cherry-picking by other carriers, unconcerned with the overall affect on the region does not stimulate new traffic, but simply splits the available traffic and destabilizes the market without any long-term benefit to the consumer.

Without strong market exit provisions, northern markets will be exposed to unreliable or inconsistent levels of service.

Our recommendations on discontinuance of service are that section 64 should be amended to include stringent market exit, or, in the reverse, market entrance conditions to be applied in the form of term commitments, financial fitness tests or otherwise on northern markets.

I will not turn to the subject of the letter of undertaking relating to service to small communities. It is with disgust that we view proposed amendment to the legislation. Without a doubt, the most significant piece of new legislation that will have a material impact on First Air is contained in this area.

First Air strongly opposes as highly discriminatory that part of the December 21, 1999 letter of undertaking subtitled "service to small communities" and approved by the government and also forming part of the new legislation.

Within this undertaking, our principal competitor is specifically named and is provided legislative protection for a period of three years under the guise of "service to small communities." This reference is unacceptable given that First Air currently provides a regularly scheduled year-round service, as it has for the past 50 years, to all of those small communities served by our competitor, with one exception.

This undertaking has more to do with commercial support by Air Canada to our competitor than the provision of air service to small communities; it has absolutely nothing to do with that.

Questions arise as to why the government appears unconcerned with First Air's service to 26 of Canada's smallest northern communities in that it did not consider including our company in this undertaking, notwithstanding the pre-existing knowledge of a commercial agreement between First Air and Air Canada. The entire situation is absolutely inconceivable to us, to be honest.

We operate in a competitive marketplace. First Air does not have and does not want legislative protection. We want a level playing field for our competition, and we do not agree that our competition and their employees should be able to hide behind legislation and backroom deals while we fly at our own risk to remote communities throughout the North as we have for many years.

Why should our employees, many of whom are Inuit, work without the legislative protection the government is willing to provide our competitors? What we have here is a situation with a different concept, but very similar to that described by Mr. Smith, save and except it is worse, given that our competitor is named in the bill to be protected.

Our recommendation for service to small communities is that the letter of undertaking must be amended, and it is provided for that the minister can amend that letter, to remove all reference to air carriers specifically named, or reduce the commercial support duration to a more reasonable time period.

I cannot emphasize enough the importance of reliable and efficient air service for Canada's North. I invite honourable senators to visit the northern communities, to see firsthand the impact of air service on people's daily lives. There is much territory to cover for a relatively small market.

I trust honourable senators will consider the recommendations put forward today, particularly our comments on service to small communities. We have made our commitment to service small communities by growing our business in Canada's North for over 53 years. I make an appeal to you to ensure that this legislation allows us to continue with this development and not risk the employment of Inuit throughout the North. Thank you.

The Chairman: Some have argued that the government should raise the restrictions on foreign ownership to allow small airline companies access to greater capital, from 25 per cent to maybe 49 per cent. This can be done by way of regulation. It is not provided for in the legislation itself. What is your view on that?

Mr. Smith: I think you should raise the figure. Twenty-five per cent is not enough. Our markets are too thin. It is not that relevant for small carriers, but it certainly would have been relevant for Canadian Airlines, and it would certainly be relevant for Canadian Regional Airlines which I understand is to be sold, but nobody knows what price is being asked.

Without some foreign ownership, I do not think we can sustain ourselves. Foreign ownership will give us the cross-border feed by code share with American carriers or whatever else. Without some other code share, companies like Canadian Regional Airlines, if they stay on their own, will never sell. It will not happen. You must have a connection to AMR, United or some entity like that. We must have some feed.

No one in Canada will put up some money to buy that airline unless that is in place. A foreign owner would do that to get the benefit of the feed from another market. It would open up the doors.

Mr. Davis: Access to capital is not a huge issue for our particular company. It is more driven by how much capital the business can generate.

I believe most companies our size or smaller would have a difficult time attracting foreign ownership because of our small niche markets. We are of no interest to foreign owners.

It may help carriers like WestJet where there is a good history, where there is a significant amount of growth, and where there is a new market. Those questions are probably better directed at the companies like WestJet and Canadian Regional Airlines.

I do not know if it would help small companies very much. Although it certainly would give us more flexibility. I believe it would probably help the "mid-cap" companies, if you wanted to call them that -- the WestJets and the Canada 3000s.

Senator Forrestall: Both of you have taken quite a swipe at the Competition Bureau which is a bit of a surprise to me because, in the long term, you will find them to be among your best allies. Far be it from me to defend the bill.

The government can pass whatever legislation it wants and be as well-intentioned as possible in trying to protect the public, but if the Competition Bureau, as it is currently formed and staffed, will not enforce the law, the government is wasting its time.

I believe there is some merit in the bill in that it will give to the Competition Bureau the type of clout it requires to lay criminal charges. With the peculiar immunity we have here, that is something the Competition Bureau would need to look at immediately upon passage of this bill. I recognize, however, that does not do what you want done. The predatory action is regrettable; indeed, it is down right criminal.

My concern is that perhaps the activity of the bureau has been limited or ham-strung up until now by legislation that has not allowed it to do what apparently has had to be done.

Recently, we discussed WestJet's entry into Eastern Canada, specifically into the Moncton market. The deputy chair of the Competition Bureau told us that, had the legislation before us been in effect, he would have looked into possible criminal charges against Air Canada for its action to oversell seats and underprice WestJet in Moncton, after years of benign neglect. His view of the situation was that Air Canada saw someone nibbling at a little piece of cheese in the corner, and they felt they had no right to do that. I agree with him.

I am suggesting that the bill does extend quite a bit of clout. Mr. Davis, I appreciate your difficulty, but do you not see anything in the bill that will strengthen your position? Is there nothing in the bill that would give greater protection to your operations?

Fifty-three years is a long time in the market. I dabbled in it for a few years myself, and found it to be a bottomless pit. It is, believe me, unless you can manipulate the situation and do certain things.

Do you not see anything useful in the bill in the sense that it will give to the Competition Bureau a far greater mandate and a stronger legislative position from which to act? The question of the level of the penalties is a moot one in that it is debatable, and perhaps it is too small considering the incidence of predatory action.

Mr. Davis: From our standpoint I do not believe that we are taking a shot at the Competition Bureau. They have been proactive throughout the process. They have been open and they have listened to us. We have no problem with much of the bill. In fact we could live with it in its entirety except for the inclusion of the letter of understanding struck between two of our principal competitors in a backroom deal. I am referring to Transport Canada and Air Canada.

We have a commercial agreement with Air Canada. They have a commercial agreement with Canadian airlines. Tomorrow when this bill is passed, if Air Canada breaks an agreement with a competitor, a jail penalty and a fine of $5 million can be imposed. If First Air breaks an agreement or does anything to them, the matter will be dragged through the courts. They have complete legislative protection for their employees. They cannot lay off any of their employees who were formerly Canadian Airlines employees. All their employees are protected. They all live in the south. First Air employs 450 people who live in the North where it is difficult to find jobs. Many are Inuit. Can First Air compete against this? It is a matter of: "If you break their rules, you go to jail. If they break our rules, the penalty will duked out commercially." We know which way it is going to go.

Mr. Smith: I did not come here to take shots at the Competition Bureau. I certainly did not start out to do that a couple of weeks ago when we brought our case before the Competition Bureau. However, the lack of interest by the Competition Bureau has led me to take shots at them.

Their reason for inaction is that the alternative of Canadian Airlines going broke was a much worse prospect. That is not what I want to hear from the Competition Bureau.

Senator Perrault: Hear, hear!

Mr. Smith: It is not their place to tell me that. I had a contract, and it was breached by a third party. That is a tort, sir.

I do not expect this committee to deal with that. We will litigate that ourselves. However, the capability of passengers travelling to and from Vancouver Island has been severely hampered. Not only did Air Canada precipitate the breach of this contract, they doubled the capacity that they were operating on those routes. That is predatory behaviour.

I have one other short question, if I may -- and I am not being facetious because I don't know much about the Competition Bureau B -- but can anyone tell me if the Competition Tribunal has ever imposed sanctions against any party?

Senator Perrault: That is a good question.

Mr. Smith: I read in the newspaper that they have not done it in 20 years.

The Chairman: We will have to check that.

Senator Forrestall: Let me attempt to respond to that. I do not think that they have, but I do not think that is because of any lack of will to intervene where intervention seemed necessary but, rather, because of a lack of adequate legislation.

If they do not have a legislative position to work from, it is pretty difficult for them to pursue a matter. I asked the question because this bill, if I understand it correctly, does give them some teeth to act. If you were to ask the same question a year from now, and the answer were to be no, I would be 100 per cent on your side. Then they would be failing to act when they had the tools with which to act.

I happen to have a regard for the bureau because I believe that it will be able, in a much more compact period of time, to take corrective steps. It will be able to do whatever is necessary, including initiating criminal proceedings, issue cease and desist orders, and have the ability to demand that an order be varied. They could threaten that, if the order were not changed within 24 hours, the company would be penalized. The board will now have that kind of authority. This government is remiss and previous governments were remiss in not being able to foresee the characteristics of flying in Canada today.

This is the new millennium, and we need new rules. They must effectively protect those who do the work, and who are safe operators.

The Chairman: We have the proposed legislation before us, and regulations will be tabled, although we do not have those yet.

Senator Roberge: Do you have a copy of the regulations that were deposited yesterday by the Competition Bureau?

Mr. Smith: We do not have them. I only have Bill C-26.

The Chairman: We can provide you with a copy of the regulations.

Mr. Smith: I am gratified with what is contained in the bill and I hope that the law will be applied.

Senator Roberge: The regulations will strengthen the legislation.

The Chairman: We can provide both of you with the regulations that were tabled yesterday. The document is in the public domain.

Senator Kirby: Mr. Smith, would you ask your lawyer to consider those draft regulations and let us know whether they solve some of the problems you raise? My sense is that they do, but fortunately, I am not a lawyer. I realize that you cannot answer that question now, but we would appreciate it if he would drop us a note.

Mr. Smith: I will do that.

Senator Callbeck: I have two questions, Mr. Davis. You mentioned that First Air flies into 26 remote areas. That certainly provides a very necessary service in the North.

On how many of those routes do you have competition?

Mr. Davis: We have competition on pretty much all of the jet network, save for Resolute Bay, which we only go to three times a week. All of the jet routes are 100 per cent competitive. On the turboprop routes, it is roughly about 80 to 85 per cent competitive, and on the 15 per cent that does not have scheduled competitive service, there is Charter activity that creates competition in those markets. For the most part, it is all competitive.

Senator Callbeck: Do you make money on all these routes?

Mr. Davis: No. We have built our business on trying to provide a broad route network throughout the North, because we want to be what we call "the one-stop transportation solution." A shipper or passenger can come to us to fly to any destination in the North. Customers do not have to go to two or three different carriers. On some routes we do not do very well.

Senator Callbeck: In your brief, you state that cargo rates should not be included in the proposed section 66. Are you saying that you do not think they should be reviewed by anyone?

Mr. Davis: No. It is all competitive. I have no idea what cost model would be used to determine what rates are reasonable. I think that it is incumbent on the agency to tell us how they will determine what is a reasonable price and we will live with that. There is no way to come up with a cost model.

Senator Callbeck: If it is on a monopoly route -- if there is no competition -- it has to be reviewed, does it not?

Mr. Davis: Against what should it be reviewed? Do you mean that it should be reviewed against what Air Canada charges to fly between two places? In Resolute Bay there is not a monopoly. We are the only airline willing to take the business risk to fly there. Nobody else wants to fly there.

Mr. Smith: Senator, we are in the same position with our airline, but on a smaller scale. We fly to small communities that really are not that viable, but as a package, it gives us a bit of flow-through in our own route. It helps out, and it is part of what we do in our business. We take the mail, but we do not make a lot of money doing it. There are competitors. As Mr. Davis has said, anyone can transport to these places and charge whatever they want.

Mr. Davis: Why is this legislation being put in place? It is to protect the public interest against the dominant carrier. Who will this legislation affect? It will not affect Air Canada, but rather it will affect carriers like Pacific Coastal Airlines and First Air that fly into small communities. Air Canada is reasonably competitive everywhere else, or at least it can be shown as being competitive against surface transportation.

Senator Callbeck: Mr. Davis, you went through the passenger fare complaints review once. How long ago was that?

Mr. Davis: That was two years ago.

Senator Callbeck: Has that been tightened up since?

Mr. Davis: The legislation has not changed since that time. The process will be far more complex and again, all of this was to protect the public interest from the new dominant airline. We feel that there will be all kinds of complaints in the North, a place where transportation costs are high.

Senator Callbeck: What, in that regard, do you feel should be in that legislation that is not in it?

Mr. Davis: We should leave it the way it was, that is, have a review of basic fares. However we have created a new process, but what are the review criteria? How did we objectively decide what is reasonable?

Senator Callbeck: Mr. Smith, have you had dealings with the Competition Bureau before?

Mr. Smith: No, I had no occasion to.

Senator Callbeck: This is your first time.

Mr. Smith: These are our first dealings.

Senator Spivak: I would like clarification, Mr. Davis. You say that all of your routes, except the one to Resolute Bay, are competitive routes and not monopoly routes. Is that correct?

Mr. Davis: That is correct. I would also mention Nanisivik. There is a route between Iqaluit, Nanisivik, Resolute Bay and Yellowknife. No other airline flies that route right now. That is a jet route that we fly twice a week from the east and once from the west.

Senator Spivak: Are all of these other routes also served by Air Canada?

Mr. Davis: They are served by Canadian North.

Senator Spivak: That is now Air Canada.

Mr. Davis: Effectively, yes. It is an interesting ownership. Canadian North is a virtual airline as it is a marketing company. The aircraft are still operated, maintained and controlled by Canadian so, effectively, it is Canadian Airlines that we are competing against.

Senator Spivak: Thank you.

Senator Finestone: When we finish with this group of intervenors, I would like to table a letter, please.

I have had the pleasure of flying First Air quite often. It is a wonderful airline. I was interested in what you had to say about the whole issue of there being no definition of process. I would ask you the same question that was asked of Mr. Smith.

Would you look at the new regulations to see if there is any process is outlined therein that would define the issues that cause you concern? I believe you said that there is no defined process; there are no rules regarding confidentiality; there is no objective decision criteria; and that none of the parties involved -- the complainant, the Canadian Transportation Agency, or yourselves -- was satisfied with the process. You felt that it was an unproductive exercise that was carried out under existing legislation and reviewing only a single passenger fare type. Continuing, you suggest that it will be a nightmare when they enlarge their mandate.

Perhaps you could check to see if those definitions are contained in the regulations. That might be helpful to you and it might clarify the process for everyone. Would you do that?

Mr. Davis: I have never seen anything tabled by the CTA that outlines a new process.

Senator Finestone: I believe that the clerk will provide you with copies.

Mr. Davis: Is this from the Competition Bureau?

Mr. Smith: This is from the CTA.

Senator Finestone: Given that you are servicing small locations, do you believe that it might be helpful if there were something that differentiated Canada on a geographic basis? That is, in reference to the nature of the domain being served. This country is unique in that it has regional differences. As you point out, the service to areas of Northern Quebec, Labrador, Nunavut or Northern British Columbia is quite different from the service provided in the south. The passenger load is thin. There is not the same potential for competition in certain areas. Do we need something that would define and differentiate that kind of service in our country?

Mr. Smith: No, it is not needed on the B.C. coast. It may be needed in the North, but on the B.C. coast we have a couple of routes and we are the monopoly. Clearly, that is because nobody else wants to do it. Several carriers have tried it and have given up. They are not long routes. They are open, and anyone can compete with us. We do not mind the competition, because it does not hurt us. That is not our problem. The North has different problems.

Mr. Davis: First Air responded to that in our presentation. We do not need and we do not want legislative protection. We want a level playing field but, with this legislation, the Government of Canada is, in effect, saying, "First Air, you are on your own. We will protect Canadian North and other poor little companies. Under this law we must look after them. You bigger guys can go it on your own." I do not think that is level. Either take that "protection" away from them or extend it to us as well. You cannot have it both ways. It is ridiculous.

Do not forget that this is hidden in the guise of a letter of undertaking that forms part of the legislation. I do not know how many people have read it, but my competitors are named in it.

Senator Forrestall: Can we ask that it be tabled?

The Chairman: Do you have your copy?

Mr. Davis: I am afraid I do not.

The Chairman: Would you send it to us?

Mr. Davis: Certainly.

We can live with all the other things. We will work with the CTA, and the Competition Bureau has done a reasonable job to this point. However, this letter of undertaking is ridiculous. Why should our employees not have legislative protection too?

Senator Finestone: I would appreciate it if you would follow up on Senator Forrestall's recommendation and table the letter with us. We can certainly address that when we consider our recommendations.

The Chairman: Senator Finestone, you do have the letter in your book. This has already been tabled by the minister.

Senator Finestone: Do we intend to deal with that, then?

The Chairman: May we finish this first?

Senator Finestone: It would be helpful if you would tell the committee where to find that letter, please.

In the meantime, I should like to ask a question of you, Mr. Smith. I read your presentation with great interest, as well as that which came from Mr. Kenneth Regier, and I must say that I had a great sense of sympathy for what you were going through. It struck me as being grossly unfair. Not only was it breach of contract and predatory behaviour, but it was certainly not in the interest of Canadians, or of fairness. You said you do not know whether or not the new practice under the regulations will meet your needs.I refer to what was said in the Financial Post article, which states:

Past failures to adequately police predatory pricing are not related to the weakness in the Competition Act itself. Rather, the Competition Bureau has failed over the past two decades to bring cases against predatory behaviour before the Competition Tribunal under existing legislation.

Then it is stated:

In fact, a lack of enforcement -- not weaknesses in the legislation -- hinders actions against predatory practices.

In reading this I get the sense that the Competition Bureau presently has what it needs to address your concern. However, it is clear to you that it is over 20 years since enforcement was even considered. You believe that the law is meant for everyone and, of course, conformity with the law would be the ideal. Therefore, I hope that, when you review the regulations, you will find that what you thought was in place is reinforced, so that you need not ever experience such a situation again.

Where do you stand now? In what practical way can you move towards enforcing your rights?

Mr. Smith: We have attempted for the past several months to negotiate with Air Canada, Canadian Airlines, and their affiliates to reach some resolution of this matter whether it be by sharing the routes or sharing the code somewhat. As I say, we do have a contract which is now a tort, but that, of course, is out of your jurisdiction. I have been pushed from pillar to post but, basically, no one is doing anything. I decided that I had no recourse but to go to the Competition Bureau, the minister, and anyone else who will talk to me because, frankly, I want to make life miserable for Robert Milton. He has made life pretty miserable for me.

Senator Finestone: I think there is a line-up.

Senator Perry Poirier: Make your reservation early.

Mr. Smith: The difficulty is that Robert Milton will only be here for a couple more years and he will parachute back to America. I intend to be in Canada for a long time. I was born here, I have three sons working in my business with me, and we will not be folding our tent and going away. However, I dislike having to reinvent the wheel. I was brought up under the highly regulatory atmosphere of the CTC, if you recall, the old Canadian Transport Commission, where it took a year just to get the rights to fly to a destination.

I do not have a great deal of problem with the deregulation that has taken place. I believe it has been fairly healthy. There were some growing pains, and many fly-by-nights have come and gone. That is history. Now we have one carrier in Canada that has an airline code that means anything to anyone B the AC code. The CP code is still around. The code is absolutely essential for the feed for smaller carriers, even carriers as small as First Air, and it is not a small carrier. Bear in mind that everything goes east and west in Canada except for First Air and us. We go north and south on the coast, and in British Columbia everything hubs in Vancouver. I do not care what part of B.C. you are going to or from, you literally go through Vancouver. In the North it is generally Yellowknife or Edmonton.

In any case, we feed into the hub. If you consider Vancouver Island, which is specifically my problem, the passengers there had a choice of Air Canada, CP or any other number of carriers. However, 82 per cent of the traffic that flies on airlines out of Vancouver Island is flow-through traffic, which means the passenger bought a ticket from Nanaimo to Ottawa for $1,025. You could buy the same ticket from Vancouver to Ottawa for $1,000. What happens is that, for a $25 add-on, the passenger can go all the way from Nanaimo to Ottawa. Air Canada wants the main line feed, they want the big ticket item, so they will just add that little trip on to the end to feed their own airline.

Air Canada is not satisfied with that. They want to encompass that market entirely. I have been told by Air B.C. that they have extra airplanes that they can deploy in the routes we are serving. They had five direct flights to every one of those markets. They have never done that before. They doubled their capacity on those routes purely because I told them that I would stay there one way or the other, without the benefit of flow-through. I have 18 per cent of the market and I have to try and to stimulate some new O&D traffic between the points we do service, but I do not have the facility to sell a person a ticket from Nanaimo to Ottawa, or Toronto, or England, or anywhere else. I must rely on feeding someone else on a sector fare situation, which is grossly different from having a flow-through seamless ticket. "Seamless" is something the big carriers like to talk about.

Senator Finestone: What are you doing about all this?

Mr. Smith: We conducted our last flight on April 1 for Canadian Airlines. We held the aircraft overnight in all three of the stations that we were serving at that time, and we came out on April 2, with our own code, to Vancouver. We put in a WestJet style of A to B fare system hoping to stimulate a market to mitigate the losses. I have the equipment, the pilots, and the people. I had less than 60 days to react to this situation. It is costing me $300,000 a month to sustain those short routes, but I will not go away. I will be there.

What disturbs me is that we had gone through all the growth factors, we had built the routes, we were doing well, and a third party comes along and yanks the code out from under us. All the passengers that used to buy Canadian tickets now ride on Air Canada. That is the difficulty. The code is essential. It gives the monopoly to Air Canada. I believe the minister stated B or perhaps it was in the Stan Keyes report B that there should be a provision to enforce the code share with the smaller carriers because it is absolutely essential to the growth of the industry.

Senator Finestone: I find this disturbing. They are being very greedy. I enjoyed reading what certainly is not put into action -- the remarks of Konrad von Finckenstein -- and I hope that he gives you a fair response to your detailed letter. I hope you see some action quickly.

Madam Chairman, I find the whole approach contrary to anything we heard when we conducted our first set of hearings respecting Air Canada. This is the behaviour that we were worried about and, unfortunately, it looks like it is becoming a reality.

Senator Roberge: You have a legal position to take in regard to the breach of contract. Are you acting on that?

Mr. Smith: Yes.

Senator Roberge: There was a grey area, I believe, between the time Air Canada merged with Canadian and the actual coming out of the regulations and Bill C-26. If you look at those regulations, you will see that they stipulate that this would be totally unlawful. It is definitely predatory behaviour on the part of Air Canada.

Senator Spivak: Senator, could you read out what you are talking about?

Senator Roberge: I would have to find it in the regulations. It specifies exactly that the point that you have mentioned is predatory behaviour. There is no reason why that should not clear up the situation. I asked the Competition Bureau -- and unfortunately we did not have your comments then -- about the letter of May 18 that Air Canada sent to travel agencies. It states that it will be an incentive to all travel agents to utilize Air Canada in the United States and internationally. That is predatory behaviour. In my estimation, your situation would be the same.

That was not a question, but just a comment. Do you wish to address it?

Mr. Smith: Early on in the negotiations with Air Canada, questions concerning predatory behaviour and the situation with travel agents were brought forward. There was concern about what would happen with travel agents. I think the minister made it very clear, back in October, that such actions would not be tolerated. In fact, certain sanctions were placed on Air Canada in order for them to complete this merger. One of those sanctions is code share. Another is predatory behaviour. There are many of them.

I brought this up with one of the Air Canada representatives with whom I deal and he said, "Oh, but they did not force that upon us." I would like to know, sir, what happened to cause it to fall through the cracks. The minister asked for it. The parliamentary committee asked for it. Stan Keyes asked for it. It did not happen.

Here we are, trying to pick up the pieces. Stan Keyes' report outlined all the difficulties. It is one of the finest documents I have ever read.

The Chairman: I hope you read our report too.

Mr. Smith: I was gratified, Madam Chairman, when I read Stan Keyes' report. I thought, "There is a God in Ottawa." It is a very well done report. Unfortunately, many of its recommendations fell through the cracks, and now you are left to try to deal with them.

Senator Roberge: And we are. I think this grey area will become clearer.

Mr. Davis, you said that you object to your competitor, which is a Canadian subsidiary, having legislative protection. I do not know if you would want to have that kind of protection. Do you really want to be involved in having to guarantee job security and so on?

Mr. Davis: I said in my report that we do not want or need protective legislation. However, there is no way you can give it to my competitor.

Senator Roberge: You have a deal with Air Canada and your competitor belongs to Air Canada. If there is an inkling of predatory favouritism from Air Canada toward that corporation, then you really have something with which to go to the Competition Bureau, correct?

Mr. Davis: That is unlikely because the legislation states that Air Canada must do that for that company. The government has sanctioned this. You are saying, "Air Canada, look after Canadian North and Calm Air," which are my two principal competitors. The legislation states: "I do not care about you."

Senator Roberge: I really do not understand.

Mr. Davis: It says that right in the letter.

Senator Roberge: I never saw that letter.

Mr. Davis: It states that Air Canada, in covenant with Her Majesty the Queen, shall ensure that during the same period, meaning the three years, support services of the nature and kind currently being provided to Calm Air International or any of its wholly owned subsidiaries, et cetera.

Senator Roberge: The government is forcing the divestiture of Canadian Regional Airlines. It should have been the same for you. They should have forced the divestiture of the other competitors up north in order to create a level playing field.

Mr. Davis: Just make it a level playing field. We do not want legislation.

Senator Perrault: Madam Chairman, in my view, we have heard two outstanding presentations this evening. Both of these gentlemen have long years of service in this industry, and I think they know what they are talking about. Certainly from British Columbia's point of view, Pacific Coastal Airlines is very highly respected, representing 40 years of experience in aviation. Are you a pilot in your own right?

Mr. Smith: Yes.

Senator Perrault: One of these northern fly-by-your-seat guys?

Mr. Smith: I make other guys do it too.

Senator Perrault: Tell us about the working conditions in your company.

Mr. Smith: We have a profit-sharing plan for all of our employees. We have full employee benefits, including sickness, accidents, long-term health, disability, dental, eye glasses, prescription drugs, et cetera.

Senator Perrault: It is an enlightened operation.

Mr. Smith: I like to think it is. We are non-union. However, the captains of our Shorts 360s make more in annual salary than those flying the Dash-8s for our competitor.

Senator Perrault: You are a fair employer, then.

I can understand why you do not want to end up as roadkill. It is worrisome, for example, to read this part of your speech, which I thought was unbelievable.

On February 4th of this year Canadian wrote us and advised that the Agreement was being terminated as of April 2nd, but we could meet and discuss other opportunities. Some talks with Canadian and Air Canada took place, but Canadian then told us they could do nothing and Air Canada said that they were not really involved.

My God, but that is a cavalier attitude toward an attempt by a free enterprise operation to maintain its existence! What happened at those meetings? Did you have a frank discussion?

Mr. Smith: Yes, and it got franker toward the end.

Senator Perrault: I can imagine.

Mr. Smith: I have never been noted as bashful. We tried to explore avenues whereby we could share some of the markets or generate ideas. They are "the big red gorilla." We said, "Show us what you can offer us. If you want to fly these routes, what can you offer us?"

Senator Perrault: That is a fair question.

Mr. Smith: They came up with nothing.

Senator Perrault: That is a very ominous response. There is some hope, in that the Commissioner of Competition and his staff have promised to be very tough. However, you suggest their track record is not very activist.

Mr. Smith: Apparently not. Nobody has yet come forward to tell me that they have done anything.

Mr. Davis: Any lawyer will tell you that predatory behaviour is extremely difficult to prove. The best example, especially on pricing, is gas for cars. When the price changes on one side of the street, 30 seconds later it changes on the other. Is that competitive behaviour? Maybe, maybe not. It is the same with airlines. We publish our prices on reservation systems, which are seen all over the world. As soon as competitors see it, they match the price. I am not sure that is predatory behaviour.

Senator Perrault: You are looking for fair play.

Mr. Davis: You were talking about pricing. These are all new rules. Time will tell on this predatory behaviour issue and how the Competition Bureau acts on it. When you look at predatory behaviour, capacity, frequency, slot congestion, and so on, it remains to be seen how the Competition Bureau will act.

What can you do if a gas station changes its price five times a day? I feel bad for WestJet over the Moncton issue, but that is the way it works. If you are going to stop it there, then you have to stop that practice by gas stations too. We have to look at capacity, frequency, and slot congestion.

Senator Perrault: You are asking for fair play for all.

Mr. Davis: Those are the things that the Competition Bureau should be targeting. Few cases of predatory behaviour have ever gone very far through the courts.

Mr. Smith: On predatory behaviour, I am not talking about price. I am not worried about the price. People know what their product is worth. I have been undercut by all kinds of airlines. I run a route between Vancouver and Powell River. It is a niche market. Over the last 20 years, 14 airlines have taken a run at me in that market, but I have never had to drop my price to beat them. I keep doing what I do, and eventually they disappear. That includes Air B.C., PWA, and several others. I do not worry about the price. That is not the point. The flow-through passenger is a big concern for most of us in this industry. There is only one airline code that means anything in this in this country any more, and that is Air Canada's. That may be, but when Air Canada starts putting their own feeders in on top of little guys like myself, doubling their capacity on the same routes, and they have the only access to the code, that is predatory behaviour. When they precipitate a breach of contract between my company and Canadian Airlines, the CP designation is still there. There is no reason in the world why I could not have continued doing what I was doing with the CP designate. Air Canada can do what they want. I do not care. At least I have some flow-through passengers. I do not care if Air Canada wants to put 25 flights a day on that route as long as I have a level playing field. I am not scared of competition.

Senator Perrault: That is a fair attitude.

Senator Adams: Thank you for coming here this evening. I fly a lot, and I go home on First Air. You said that you do not want to be part of the regulations. Air Canada, First Air, and Canadian North are all different. If I fly on Air Canada, I do not meet any friends. However, on First Air I often talk to friends and recognize the people on the plane. When I fly out of Ottawa on Air Canada, I might see one or two senators. First Air operates differently in the northern communities. We had a lot of problems with airline schedules in the north in the 1960s and 1970s. People living in the south do not have the same types of problems. It is different, as you probably know. You worry about your groceries coming in by plane. If the weather is bad, the plane cannot land and your groceries might end up in Winnipeg.

Air Canada went to Yellowknife, but people from Iqaluit to Rankin Inlet had to go by dog team in order to fly out of the north. I understand your concerns, Mr. Davis, and your worries about freight and passengers. Ski-doos are shipped daily from Ottawa to Greenland. Sometimes, cars and trucks are shipped from Winnipeg to the north every second day by plane. I understand your concerns about Bill C-26, and clause 66 in particular.

Air Canada flies into Ottawa, but not from Ottawa to Iqaluit and Rankin Inlet. You can fly from Winnipeg to Rankin Inlet, and from Edmonton to Yellowknife to Rankin Inlet and then down to Iqaluit. There is a big difference between your routes and those of Air Canada in the north. I support you, as long as you are regulated by Transport Canada.

You are concerned more about clause 66. How will it affect you?

Mr. Davis: I do not have to explain to you how important air service is in the north. First Air carries about 95 per cent of the groceries that are consumed in the north. We feel that our competitor will gain a significant advantage through legislative protection for the next three years, while we try to compete in an open marketplace with no competition. On all the other issues that we raised, for example, CTA reviews of cargo, passenger rates, and the discontinuance of service, we can probably live with it the way it is now. The big issue is the letter of undertaking agreed to between Transport Canada and Air Canada. Transport Canada is very aware of the issue. They have been listening, from the director of air policy on down. There is some sympathy, but at this point it does not look like it will be changed. It is not a level playing field when the government is out to protect a specific carrier. It is ridiculous. Rules should be generic for the public interest. It should not be, "We choose this company over this other company," which is what has been done, in our view.

Mr. Smith: I have been listening to the issue that First Air has raised. I am not that knowledgeable, but it appears to me that the government tried to protect Canadian North and Calm Air against Air Canada through this legislation. The by-product to that is through the side door. It is a "get First Air" deal that no one really contemplated. I believe that is what has happened.

Senator Roberge: Another one falls through the cracks!

Senator Adams: Calm Air flew to Rankin Inlet six or seven days a week. What is the difference between First Air and Air Canada? There was a connection for First Air with Canadian Airlines before the merger. You are saying that presently, Calm Air is more protected than First Air?

Mr. Davis: That is right. Calm Air is one of the companies specifically named in the letter of undertaking. They will become an Air Canada partner, yet they will be competing against us. We do not understand why that is occurring. They should be put on a level playing field with us.

Senator Adams: When you fly up to Nunavut, not everything is even part of that company.

I have never seen Air Canada have even one local agent for Calm Air in the north, and they have been operating there for over 30 years. It used to be that they gave the passengers nothing but peanuts, but with competition from First Air, they have changed that. It seems they just did not care about the people in the north. They would say they had no food, that somehow it had been left in a warehouse somewhere. There were all sorts of problems with Calm Air, but once First Air provided some competition, things changed.

Mr. Davis: We sometimes serve caribou on our flights, senator.

The Chairman: Thank you both for appearing. We will send you a copy of our recommendations.

Mr. Davis: Thank you. We will certainly read your report.

The Chairman: You should probably also read our last report.

Senator Finestone, I believe you said you had a letter to table.

Senator Finestone: Yes, I do. This letter is from Dr. Bob Chanteloup, Vice-President of the University of New Brunswick. It has to do with his experience of trying to use the frequent flyer program of Air Canada and Canadian Airlines, the difficulty he had, the cost to him, and so on.

The Chairman: We will have copies made.

Senator Finestone: Yes. I think what is important here is again the lack of integrity in respecting contracts and undertakings. I hope we can address that during our proceedings.

The Chairman: Thank you.

Our next witnesses are representatives of the Canadian Transportation Agency. I bid you welcome.

Ms Marian Robson, President, Canadian Transportation Agency: Honourable senators, we are pleased to be with you this evening to talk a little about the new responsibilities of the Canadian Transportation Agency under Bill C-26.

As honourable senators will know, the agency has been given substantial new responsibilities under the proposed legislation. Tonight we have a short presentation for you on the agency's new role and our action plan.

I should like to start by giving you a brief review of our current activities in dealing with consumer complaints. We already deal extensively with consumer issues, both under the umbrella of the consumer complaint process, and by way of our accessible transportation program.

Last year, for example, we dealt with 165 written consumer complaints and 49 written complaints relating to accessibility issues. There were 1,046 calls related to consumer complaints on the agency's 1-800 line last year.

With respect to the current consumer complaints program, there are limits placed on the agency under the Canada Transportation Act. For example, at present we have only a limited power to deal with pricing complaints and we cannot deal directly with inappropriate terms and conditions of domestic air transportation. Nevertheless, we can and do deal with a wide range of consumer complaints, and I believe we have a good track record in helping consumers resolve their airline-related problems.

As a result of these responsibilities, we have developed extensive contacts with air carriers and their associations, and with consumer groups, especially those related to persons with disabilities and seniors. As such, I believe we have a strong base from which to take on enhanced responsibilities related to consumer protection.

On the subject of Bill C-26, we have prepared a deck to guide discussion. Copies have been distributed and I will now turn the presentation over to Mr. Currie.

Mr. Gavin Currie, Director General, Canadian Transportation Agency: Honourable senators, on slide 3, I lay out six areas where we have new responsibilities. I would like to go briefly through each one, dealing first with mergers and acquisitions.

The agency has a new responsibility to determine whether a proposed merger or acquisition would result in an air carrier that is Canadian owned and controlled. This is an extension of the agency's current responsibility to ensure that Canadian air carriers meet Canadian ownership and control requirements at all times.

[Translation]

I would like to say a few words about the discontinuance or reduction of services, that is reduction resulting in at least one less flight per week. A carrier must give 120 days notice and consult with local representatives if that carrier is the last, or next to last, carrier serving a destination or if the discontinuance of a year-round non-stop scheduled service would result in a reduction of at least 50 percent of the weekly passenger-carrying capacity on a route. However, 30 days notice is required it that service has been in operation for less than one year. Obviously, the point is not to discourage new services.

There are certain steps that the agency can take under such situations. It may, on application and after reviewing relevant factors, reduce the notice period. If the required notice is not given, the Agency may order the service reinstated for up to 60 days. It should be noted that the Agency cannot prevent discontinuance of a service. This section of the act provides only for notice to be given.

[English]

I shall turn next to the subject of domestic pricing. The bill proposes a new clause 66 to replace the current section 66. First, domestic pricing applies only to routes within Canada served by one licensee, and in this case, a licensee includes affiliates.

In contrast to the present section 66, the proposed clause applies to all fares and rates on such routes. The agency may determine that there is one licensee on a route if it finds the alternative service is unreasonable.

If the agency determines, on complaint or on its own motion, that a fare or rate or an increase in a fare or rate is unreasonable, it may disallow the fare or rate or the increase, order a reduction, or, if practicable, order a refund.

In addition, if the agency determines that the range of fares or rates on a route is inadequate, the agency may direct the carrier to publish and apply additional fares or rates.

The proposed legislation gives considerable guidance to the agency in determining whether pricing is reasonable. In this case, the agency shall consider historical data, fares and rates on similar but competitive routes, any other information provided by the carriers, and any additional information requested by the agency that it considers pertinent.

[Translation]

Briefly, with respect to domestic tariffs, carriers must have a tariff which includes all fares, rates and charges as well as the terms and conditions of carriage. If carriers do not comply with their tariffs, the Agency may order them to do so or order compensation for expenses.

Regarding the terms and conditions of domestic carriage, on complaint, if the Agency determines that terms and conditions are unreasonable or unduly discriminatory, it may suspend or disallow them or substitute other terms and conditions.

[English]

Finally, I shall say a few words on the aircraft complaints commissioner. This position was added during consideration of the bill by the Standing Committee on Transport in the House. The commissioner will be a temporary member of the agency. In essence, this position provides an avenue for complaints for which no other remedy exists. It is intended that the commissioner will use mediation techniques to solve complaints, as no power to impose a settlement is given.

It is important to recognize that the carrier must first be given the opportunity to deal with a complaint before the Air Travel Complaints Commissioner becomes involved.

The agency reports to the minister semi-annually on the nature and number of complaints filed and any systemic problems observed by the agency's Air Travel Complaints Commissioner. I should note that this reporting is modelled on the agency's annual report, and it is certainly intended that the minister will table this report in Parliament.

The intent is to keep the process for the consumer as simple as possible. Normally, consumer complaints to the agency will first flow through the agency's commissioner, who will deal with them, if possible. Where appropriate, however, complaints will be transferred to other normal agency processes. For example, a complaint regarding pricing on a route where there is only one carrier would be transferred to the section dealing with pricing complaints.

This provides a flavour for the role of the Air Travel Complaints Commissioner as we see it. I will now return the microphone to Ms Robson to speak about our action plan.

Ms Robson: Honourable senators, I should like to comment briefly on our action plan. We have been hard at work in preparation for the proclamation of this proposed legislation.

We have set up a project team, an internal group that has been pulled together to manage the transition to the new regulatory environment. We plan an extensive public information campaign to inform Canadians about their new rights and the new roles of the agency.

That campaign will include a press conference, including some regional press of course, and regional meetings. We will have posters and brochures targeted primarily at the travel industry. We have designed a Web site for on-line complaints and instituted a new 1-800 number. We have contracted initially with a call centre to handle telephone complaints in the first month because we are having difficulty determining future volume.

If we need to, and we are not sure of this at this point, we will follow up with an advertising campaign. We will be providing information packages to all MPs and senators. We certainly hope that your staff will refer any inquiries or complaints that you may receive to the agency.

Operationally, we have expanded our complaints investigations unit to deal with the increased workload and to provide support to the new complaints commissioner. We are creating a new pricing investigations unit, developing and refining our price monitoring and analyzing techniques, and training staff for new responsibilities.

We intend to be ready to go into action on day one after the legislation is proclaimed. I believe that we have an already established track record with both carriers and consumers. We are confident that we can fulfil our new roles under the consumer protection provisions of the bill.

[Translation]

The Chairman: before we began, I have a question. Some people have said that they would like to see a charter of passenger rights brought in. In your opinion, given the broader powers you now enjoy under the act, can you effectively protect the rights of consumers or do we really need a charter of passenger rights?

[English]

Ms Robson: We believe that the bill will provide that kind of protection. We are interested to observe that Air Canada has announced the appointment of an ombudsman. We think that that will be a very helpful development in resolving problems and complaints. We also understand that they may be considering some sort of "performance standards," if you will. I do not think they are calling it a bill of rights as such, but it will be a set of service standards that can be reasonably expected. If that is the case, it will be very helpful to us in trying to make judgments and decisions about reasonableness, or some of these very fuzzy concepts. We are interested in seeing what Air Canada is examining.

However, we feel that it is broadly based in terms of the bill.

The Chairman: You feel then that the powers that you will have will be enough to protect consumers?

Ms Robson: We are certainly hopeful that that will be the case, yes.

Senator Finestone: I have a point of information or clarification. Perhaps there is a typo on page 14 of the brief. You have said, Ms Robson, that the commissioner will use mediation techniques, with no power to enforce a settlement, and that carriers must first be given opportunity to deal with the complaint.

I do not understand why there would be a call centre and everything else to receive complaints if there is no power to impose a settlement. Have I misread that?

Ms Robson: No, I do not think you have misread it. We have two types of complaints. It is a little complicated.

The agency has legislative authority on some complaints and can actually take corrective measures. Those complaints relate to things like fares and tariff conditions.

The other type of complaints relates to "softer" issues such as service complaints, including long line-ups and bumping. For the latter, the Air Travel Complaints Commissioner will have a mediating, problem-solving role.

It is expected that in most cases, the complaints received will be first dealt with by the complaint commissioner. He or she will try to resolve these issues directly with the carriers. That is the intent.

Senator Forrestall: You have made something clearer. I was a little confused earlier about the temporary nature of the complaints commissioner. I gather that the complaints commissioner becomes a temporary member of the Canadian Transportation Agency?

Ms Robson: That is correct.

Senator Forrestall: What does that serve? Why would the commissioner be a temporary member?

Ms Robson: There is provision under our legislation for seven full-time members, and currently we have seven full-time members. However, there is also a provision in our act that allows the minister to appoint temporary members for a period of one year, with an opportunity to review that same incumbent for an additional year. That is the provision in our act that would be used.

Senator Forrestall: Have you worked out the procedures that will be followed by this temporary complaint receiver? In other words, do you have a process? Will it be a matter of someone arriving in Gander, Newfoundland, and saying that he had had a hell of a trip from Toronto to here and wants to complain to a 1-800 number? Will they speak to a machine or to a person? Will the machine tell them to write a letter because it is busy?

I can accept that this came as a surprise. I should ask why it was a surprise, but I will not because I am afraid of the answer that you might give. Have we done any of the work-up processes yet?

Ms Robson: Yes, we certainly have.

Senator Forrestall: Would you let us in on the secret?

Ms Robson: We are, of course, expecting the appointment of the complaint commissioner. We are planning for that. As I mentioned earlier, we have a transition team. We have additional staff on the complaints side. They will be serving the complaints commissioner, as well as the other members of the agency.

The complaints commissioner will be dealing strictly with airline complaints, whereas the other members of the agency are multi-modal. This person will be dedicated full time to this process and will be supported by staff. I will ask Mr. Currie to give more details on our plans.

Mr. Currie: We have started to give the matter considerable thought. In terms of your example of the way in which a person who wants to complain gets in touch with the agency, we already have a 1-800 number. It is intended that it be answered by a person; that is our current plan. Although it is possible that different kinds of complaint may go to different operators, there will be a person, not a recorded message instructing you to send in the complaint.

We do have a Web site planned, and there will be much information on the site about how to complain. It is intended that an on-line complaint form can be used to complain in written form.

The 1-800 number will explain the complaint process. We will not take the complaint over the phone. The carrier must be given a chance to understand the complaint and respond to it. Therefore, we must have clear information. It will be necessary to have something in writing -- a letter, fax, or through the Web site -- something electronic.

It is anticipated that the commissioner will then approach the carrier with the complaint. The carrier will be requested to make comments, and we will try to resolve the complaint at that level. We have some reasonable expectation that a number --

Senator Forrestall: Please, slow down a little so that I can understand. The passenger is at Gander and has called the 1-800 number, does not have a Web site or even a computer, and would not know how to use one anyway. Someone will say to him, "Write a letter."

Senator Spivak: The message might be, "We are serving other customers. We value your business, so please stay on the line to hold your priority."

Senator Forrestall: In any event, this is very important. Perhaps the majority of people who fly are more sophisticated and possess the know-how. However, it is important that the first interface should not be a strange voice that is just another adjunct of a government agency. Rather, it should be in the body corporate responsible for causing the complaint -- real or imagined. As I understand it, you will not take the complaint in verbal form. Therefore, the passenger must write to you.

Mr. Currie: Yes.

Senator Forrestall: You in turn will refer that in due course to the airline that is being complained about. In most cases, it will be Air Canada.

Mr. Currie: That is not true, based on the complaints that we have received so far.

Senator Forrestall: Is it not?

Mr. Curry: It is not always Air Canada. We also receive complaints about many other airlines.

Senator Forrestall: I do not believe that. I have over 1,100 complaints and all of them relate to an interconnection service, the lack of interlining, or the baggage. The stories are horrifying, and I am sure that you have seen them because they have to be dealt with somewhere. I am sorry, but the process is most important. Would you then refer the complaint to the airline in question?

Mr. Currie: Yes indeed.

Senator Forrestall: What if the airline in question claims to be too busy? What then happens to the person's complaint?

Mr. Currie: Well, the Air Travel Complaints Commissioner has the power to require the carrier to provide information on the complaint.

Senator Forrestall: What do you mean by "require"?

Mr. Currie: In the bill, the Air Travel Complaints Commissioner can require the submission of documents by the carrier. It is written quite specifically in that clause of the bill.

Senator Forrestall: I will take your word for that.

Mr. Currie: You do not need to take my word for it, senator.

Senator Forrestall: I will. I do not want you to take the time to read it. I can find it just as easily as you, or almost as easily.

What happens then?

Mr. Currie: The expectation is that the carrier will give its side of the story and the commissioner will then look at both sides. Certainly, some complaints are valid and some are not. The commissioner will decide whether it is valid. If it is, the commissioner will try to use a mediative process to resolve the complaint.

Certainly, we have found on a number of occasions that once it is brought to the carrier's attention by the agency, the carrier looks at it more seriously and quite often the complaint is resolved. Many complaints are resolved in that way.

Senator Forrestall: That is what is wrong. Why should they take it more seriously simply because the agency has brought it to their attention?

Mr. Currie: I cannot explain why they would. This is simply a question of getting the carrier to look at the issue again. First, with the kind of publicity there has been, there will be greater willingness on the part of Air Canada, given its public statements. I suspect the same will be true of other carriers. There is no question the commissioner will be reporting publicly to this committee, among others, on the complaints received and their disposition. I think that kind of publicity will be effective.

I cannot guarantee that it will be, but that is my expectation. We will probably get certain patterns of complaints. I am sure that if you have received 1,100 complaints, there must be patterns among them -- certain kinds of things that come up frequently. For example, waiting in long lines at airports, or waiting a long time on the telephone to get through.

These would be raised by the commissioner as systemic issues with the carrier in question, and presumably with the implication that they should be resolved. I think that bringing that to the carrier's attention in a public way will be quite effective.

Would you want the alternative? Would you want the government to be able to tell the carrier, "You must put in more telephone operators. Your waiting time is too long"? That is getting pretty detailed in terms of telling someone how to run a business. It is a question of how far you want to take it.

There was a question from the Chair about a passenger bill of rights. Perhaps, once we have had experience with this sort of mediated approach -- a softer approach -- and if it is not working, perhaps that would be a good time to put a bill of rights in place.

I am a strong believer in dealing with things on a voluntary basis first, without using regulation unless it is really required. We think we can make it work.

Senator Forrestall: Can you give us a plausible time frame vis-à-vis the complaint process -- a complaint coming in, being properly documented and sent on to you with reference to the appropriate airline, then dealing with the response to the airline and the airline's response, not to the complaints commissioner, but to the complainant?

Mr. Currie: The airline would respond to the complaints commissioner and copy to the complainant.

Senator Forrestall: Can you imagine a time frame for that transaction?

Mr. Currie: Yes, I think that, as a guide, we can look at the time frames in the agency's general rules. Now the normal time frame for a complaint that is served on a carrier is 30 days for the carrier to respond, and the complainant is given another 10 days to react to that response. It takes between one and two months for the process to go backwards and forwards. Then there would be additional time for the commissioner to actually resolve the issue. It may happen faster.

Senator Forrestall: It would certainly filter out the anger.

Mr. Curry: Remember, these are complaints that have not been resolved with the carrier. The bill states that the person must have complained to the carrier first.

Senator Forrestall: Do you foresee a time when a complaints commissioner, who is a commissioner of the Canadian Transportation Agency, will no longer be necessary and this work will be carried out by the airlines themselves?

Mr. Currie: Well, in one sense, I hope so. I think it is a useful avenue for people to complain. People then feel that they have somewhere to turn. If the process is successful, the number of complaints will go down -- hopefully because of better service and because the carriers are dealing with complaints more effectively.

Air Canada told me a couple of weeks ago that their main aim is to put the Air Travel Complaints Commissioner out of business by improving both the service that they provide, and the way in which they deal with complaints through their ombudsman.

We also have talked about establishing a code of conduct -- their "passenger bill of rights," if you like. That would be very helpful in setting benchmarks, because if they are reasonable and the carrier has not met them, then presumably the carrier will give some recompense to the passenger. If they have been met, then perhaps the complaint is not well founded. I am reasonably hopeful that, despite the obvious problems of the past few months, things will settle down. We will go back to a situation where, on the whole, the carriers in this country serve the passengers very well, certainly in comparison with what we hear about south of the border.

Senator Forrestall: Have you put a dollar figure on the cost?

Mr. Currie: No, not as yet. The minister has said that more resources will be required, but we have not yet been able to get approval for these additional resources.

Senator Forrestall: I am a sceptic. I do not think the Canadian Transportation Agency should be involved in that. I really do not.

Are we going in the right direction? Is the agency satisfied? We heard from the Competition Bureau that they were generally satisfied that the steps that the government has taken are in the right direction. There is no question that changes will have to be made and that imaginative variations will have to be brought into the picture. Are you reasonably satisfied with the direction they are going and the rate at which they are going?

Ms Robson: My short answer is yes.

Senator Callbeck: Continuing with the complaints, you said that last year there were 165. Is your year end in December or March?

Mr. Currie: This is the fiscal year from April 1 to March 31.

Senator Callbeck: Do you know how many complaints you have had from March until now?

Mr. Currie: I am sorry. It was the calendar year, which was 1999.

Senator Callbeck: How many have you had in the last six months?

Mr. Currie: I cannot answer that, but I can give you a figure for January to March of this year. There were 76 in the first quarter.

Senator Callbeck: Do you have figures from March on?

Mr. Currie: There were 38 in April.

Ms Robson: These are written complaints, but we get many telephone complaints. These are formal, written complaints.

Senator Callbeck: Right now, how does the public know where to complain? You are talking of setting up a 1-800 number and a Web site. How do they know where to complain currently?

Mr. Currie: We have not undertaken an extensive publicity campaign on the agency's powers in this regard. We plan to do that because of the much broader consumer protection role we are now undertaking. How do people find out? We certainly do have published information on the agency. We have brochures and so on. We talk to travel agents, who are aware of our existence. The carriers certainly are. We already have a 1-800 number, but we are a small agency, and certainly we do not have the kind of profile that larger departments have.

We are probably not well known. Certainly the impression I get from around the table is that we have not told senators enough about ourselves either.

Senator Callbeck: Will you conduct an aggressive campaign?

Ms Robson: Yes. We have a considerable profile with the disabled community because we have a very specific mandate therein. We have done a major job of communications in that area, where we have responsibility for removing undue obstacles for people with disabilities. It is a narrow focus, in the sense that that is our main mandate under our current legislation. I would say that we are currently less well known to the general population. We certainly intend to rectify that through a very aggressive communications program once we have our new powers. That is the key. We will have new responsibilities. We will have a very extensive information campaign at that time.

Senator Callbeck: You were probably here when First Air made their comments about the review process on fares. They indicated there is no defined process, no rules regarding confidentiality, and no objective decision criteria. What have you done in that area?

Mr. Currie: I did not hear the First Air presentation. However, I heard some of the discussion afterward. I think section 66 provides a fair amount of guidance to the agency in terms of how the process has been carried out. Section 66(3) makes it clear that in checking whether a fare or rate is reasonable, there are certain things the agency must take into account, such as historical information, particularly in terms of fares on comparable routes where there is competition; other information provided by the carrier; and other information that the agency considers relevant.

The fundamental approach is one of comparison. The idea behind this is not to set up a rate-setting organization or do a general assessment of whether prices are reasonable. As I understand it, on routes on which there is only one carrier, the intent is to prevent disproportionate increases in the fares or the rates. In doing that, I think the agency's approach, as guided by the proposed legislation, will be to look for comparisons. If you have a route with only one carrier, you will look for a route where there is a somewhat similar volume of traffic, a somewhat similar service, and the pattern of fare increases and range of fares. That is how we see us doing it. It is basically a question of comparison. In other words, we are saying that if there is competition, almost by definition the fares will be reasonable, because that is the underlying premise. That does not mean that everyone considers fares to be reasonable. I heard some of the discussion in this committee on Monday. Some people asked whether it is reasonable to have a fare of $1,100 dollars if booked 14 days in advance, and a fare twice that if booked 13 days in advance. The rationale behind fares and price setting is quite complex.

Competition has led to a range of fares that does seem strange to some extent. The idea is to ensure that on routes where there is only one carrier, there is no disproportionate increase in fares or a range of fares that is significantly different from that on routes where there is competition. I understand that is the basic premise in the proposed legislation. That is laid out fairly clearly.

Senator Callbeck: Are you saying that present legislation is not clear?

Mr. Currie: The present legislation is different, in that it deals only with a single fare, as First Air mentioned in the discussion. Of course, until now, there have been comparatively few routes with a major volume of traffic where there has been a monopoly situation. In the south, nearly all routes had Air Canada and Canadian or their affiliates competing. Therefore, there was no basis on which complaints could be lodged.

The basic idea was still one of comparison. It was not laid out as clearly, but the intent was to try to ensure that the basic fare and the way it increased over time on monopoly routes was not disproportionate to the way basic fares had increased on comparable routes where there was competition. That is the way we understand it, at any rate.

Senator Callbeck: We had a brief from the Public Interest Advocacy Centre. They are saying they feel that they will not receive enough information. They say that the current provisions are drafted in such a way as to limit the ability of the agency to consider relevant evidence, including studies from government and private university sources on the level of cost, prices, and cost allocation in the airline industry. A government amendment would allow the agency to consider all relevant information and determine whether a fare is unreasonable. Do you not feel that you should consider all relevant information?

Mr. Currie: I agree that we should. The question is, what is relevant? From what you just read, senator, it appears to me that someone is thinking of a rate-setting exercise rather than a comparison of a fare on a monopoly route with a fare on a comparable route where there is competition.

The amount of information required is different. Clause 66(3) lays out certain information that the agency shall take into account in deciding whether or not a fare is reasonable.

In our reading of clause 66(3), it does not limit the agency, but does give it considerable guidance on things that it must consider. If there is additional relevant information, the agency has the power to require it. I do not think it limits it at all, but we do not see this as being a rate-setting exercise. We are not looking at whether, in a general sense, fares are reasonable. It is much more limited than that.

It is a question of ensuring that there are no disproportionate fare increases on routes where there is no competition, as compared to routes where there is competition. It is much narrower than a general rate-setting process or general assessment of whether fares are reasonable in a broad sense.

Senator Callbeck: In other words, the bottom line is that it must justify its expenses?

Mr. Currie: No; I do not think there will be any question of justifying expenses. Costs may occasionally come into it, but we do not see this as a question of looking at the fares being charged as justified on the basis of cost. That is an extremely complex thing to do. We do not contemplate setting up the kind of bureaucracy required to do that. If competition led to a certain range of fares on one route, we would expect fare patterns to be similar on a route with comparable traffic where there is only one carrier. That is a much more limited analytical approach than a general assessment of reasonableness. If we wanted to do it the other way, we would have to set up a much larger organization. It is a much more complex business and it would require a lot more resources.

Senator Roberge: To continue with Senator Callbeck's questions about First Air and the fares, do you or do you not have written procedures and criteria under the present system?

Mr. Currie: We have written procedures. There are general rules that lay out how the agency will carry out its proceedings, whether it is in writing or orally. There are well-established procedures to respect the rules of natural justice, fairness, and so on.

The criteria for deciding whether or not a fare is reasonable have not been laid out specifically. What has been laid out is the approach of doing it by comparison, which is what I have just been describing.

Senator Roberge: You are leaving yourself open to the whims and fancy of each investigator.

Mr. Currie: I do not believe so, because it is the agency that makes the decision, not the investigator.

Senator Roberge: If the agency has no criteria or proper written procedures, how can you have standard answers or standard comments?

Mr. Currie: The agency must deal with every case before it on its individual merits. That does not mean the agency is not consistent in its findings. You will find that it is very consistent. I do not know whether the chairman wishes to comment on this, but that is my perception. The agency does not need to have specific guidelines in every case in order to consider the matters before it. However, it has the requirement and responsibility to be fair and consistent in its approach, and the agency has certainly been so.

Senator Roberge: It is interesting to return to Senator Callbeck's earlier comments. Their remarks were: "First, some experience with no defined process, no rules regarding confidentiality, no objective decision-making criteria." I certainly hope that in this new environment into which we are heading, you will have proper procedures and written criteria so that we may have copies.

Mr. Currie: You can certainly have copies of our general rules if you would like. They are published regulations.

The agency decides how to deal with each case on its particular merits. The onus is very much on the carrier to ensure that the fares are reasonable. It is quite clear in the bill that it is to be done by comparison.

Senator Roberge: We will wait for the complaints.

In the United States, statistical information on lost luggage, delays, service problems, overbooking, and so on, are very transparent and are public. Is it the intention of your agency to insist on the same situation?

Mr. Currie: I believe that would require legislation, and the government has not chosen to impose that. In the United States, the carriers are required by law to provide this information. I am not aware of any comparable requirement under Canadian law. The commissioner will publish information on the complaints received and how they were dealt with. That is not the same as on-time performance or the amount of luggage that gets lost by the carriers. It would require a legislative amendment to require the carriers to provide this information. I am not aware of that in the proposed legislation.

Senator Kirby: To follow up on that, I am not sure it requires legislation. The commissioner could set out standards as part of his mandate, so that in order to understand whether a complaint was reasonable or unreasonable, you would compare it to the norm. I do not know how you would get the norm except by collecting the data that Senator Roberge talked about. I am not sure that the commissioner could not demand that information. It would be interesting to know whether I am correct that it could be done without a legislative change. I do not need an answer now, but that would be helpful to know.

Mr. Claude Jacques, Director, Legal Services, Canadian Transportation Agency: I am not sure I understand the question.

Senator Kirby: Senator Roberge asked whether a lot of the data on service performance, which is available in the United States, could be made available in Canada, or whether it requires a legislative change, as Mr. Currie suggested.

I said, given the fact that we have now created an office to look after complaints, one of the relevant issues in understanding the seriousness of a complaint is, where does it fit relative to average performance? An average performance is not 100 per cent. You want to know if a flight that is two hours late is terrible relative to average performance. It would not be unreasonable for the new complaints commissioner to require the airlines to give him this information so that he had some yardstick against which to measure a complaint. I was only disputing Mr. Currie's point of view that it may require legislation. It may, but I would like to know the answer to that.

In your presentation, you referred to domestic pricing and domestic tariffs. In one case, you pointed out that you could take action either on complaints or on your own initiative vis-à-vis domestic pricing, whereas under "domestic tariffs," you only used the phrase, "on complaint." It is my understanding that for the first two years that this is in effect, you will have the ability to do that also on your own initiative. Is that correct?

Mr. Currie: I believe not. We can deal with pricing on complaint -- that is ongoing -- but for two years we can also deal with it on our own motion. I did not make that distinction here.

Senator Kirby: And it is extendable by regulation beyond that?

Mr. Currie: Yes. There is no provision in the bill for us to investigate terms and conditions of carriage on our own motion.

Senator Kirby: You can only do it in response to a complaint?

Mr. Currie: With regard to domestic terms and conditions.

Senator Kirby: On the tariff issue, I am assuming there are legal definitions of the words "unreasonable" or "unduly discriminatory"? I ask that because I bet we could go around this table and get 12 different definitions of "unreasonable." I have to assume there is some modestly objective legal test. Is that correct?

Mr. Currie: I am not aware of any definition, but I am sure there is jurisprudence.

Senator Kirby: You make the call. That is all I am saying.

Mr. Currie: There is jurisprudence. I will ask Mr. Jacques to talk about it.

Mr. Jacques: There is no clear definition in the act or regulations outlining unduly discriminatory, unreasonable, or whatever. However, the agency and its predecessor, the Canadian Transport Commission, as well as the National Transportation Agency, have collected precedents to assist in the determination of a particular situation or tariff provision as unreasonable or unduly discriminatory.

Senator Kirby: I hear you say that there is a huge element of subjectivity that is constrained, at least in part, by past practice; is that a fair summary?

Mr. Jacques: It is influenced in part.

Senator Kirby: This committee argued earlier that you ought to have a cease and desist power. As I read this, you do not; am I wrong?

Mr. Jacques: We do have the cease and desist power.

Senator Kirby: Thus, while you are doing your investigation, you can at least stop the action on which the complaint has been filed?

Mr. Jacques: Yes, and we have done that in the past.

Senator Kirby: Senator Forrestall, Senator Roberge and I, among others on the committee, argued that what you have listed under "domestic tariffs" really should not be your business. It ought to be in the hands of the Competition Bureau because the pricing issue is directly related to the competitive issue. I am not sure how you separate them.

Given the expanded powers of the Competition Bureau in the airline business now, how do you see yourselves avoiding situations in which, for example, you and the Competition Bureau are investigating essentially the same issue? It may be defined differently, but it would be the same issue, particularly with respect to unduly discriminatory pricing, to take an example.

Mr. Currie: In terms of pricing, we are just looking at whether it is reasonable, not whether it is unduly discriminatory.

Senator Kirby: I am using your words on slide 12.

Mr. Currie: That slide refers simply to terms and conditions of carriage. That is things like what the airline is required to do if it loses your baggage.

Senator Kirby: It does not refer to tariffs?

Mr. Currie: Tariffs include both pricing and terms and conditions. Slide 12 deals simply with terms and conditions.

Our power on pricing is under new clause 66, domestic pricing, and there the test is "reasonable." Proposed section 66(3) gives guidance to the agency by saying that, in determining whether a price is reasonable or not on a monopoly route or a route where there is only one carrier, it must consider certain things. We take from that the idea that the basic approach is one of comparison.

Thus it is a question of whether the price on the monopoly route is reasonable compared with the price on a non-monopoly route.

Senator Kirby: What is the situation on a non-monopoly route?

Mr. Currie: We have no power on a non-monopoly route.

Senator Kirby: It was the way this was described. You are telling me that on the pricing issue, your sole involvement is on monopoly routes, which is clearly not a competitive question. Is that essentially how the dividing line will be drawn between you and the Competition Bureau?

Mr. Currie: That is certainly one of the ways.

Senator Kirby: What is the situation on non-monopoly routes with competition that is not price-driven?

Mr. Currie: We really do not have any power to deal with issues related to pricing in those situations.

Senator Kirby: By "pricing" I take it we mean dollars? There is a lot of possible competition in the airline business that does not have to include dollars.

There are other things companies can do to entice customers other than price. If it is a competitive route, and someone thinks that Air Canada is offering incentives that are not price related, who is responsible for determining whether that is discriminatory and should be stopped? Is that you or the Competition Bureau?

Mr. Currie: The term is probably "predatory." If it is discriminatory, then we would have to have someone complain to us. If someone wishes to complain that the amount they are paying for denied boarding is unreasonable or discriminatory, we can certainly deal with that.

Senator Kirby: There are issues that could fall into both your camp and the Competition Bureau's camp?

Mr. Currie: I am assuming that the Competition Bureau will be responsible if someone feels that the major carrier is taking unfair action. In other words, if there is unfair competition or anti-competitive practices, predatory practices, against another carrier. We are more likely to get complaints from consumers when the terms and conditions applied to the travel are not reasonable and discriminate in some way.

We are likely to get complaints from travellers, whereas the Competition Bureau will probably get complaints from other carriers that the behaviour of this carrier is unfair, such as we heard from the witnesses today from Pacific Coastal Airlines.

Senator Kirby: You see the source of most of your complaints as consumer driven. The inter-corporate fights will be largely filed with the Competition Bureau?

Mr. Currie: By and large, that is correct. You are right, there are circumstances where both could happen. However, as I see it, that is the major change.

We are probably going to find situations where we can both get involved, but that is the basic distinction I see.

Senator Perrault: Many have opined the alleged decline in influence of MPs and MPPs. One of our tasks as members of Parliament or legislatures has been to look after people's complaints. Are we lifting this burden from the MP who is supposed to be serving his constituency and giving it all to this new bureaucracy?

I am just playing the devil's advocate here. How far do we take this? We have had hundreds of calls in the past month about the decline in the quality of Canadian air travel. We just cannot keep up with some of the calls.

Are we to give this burden to the bureaucrats? How will MPs keep in touch with their constituents if too much of this is given to the civil service?

Ms Robson: One of the frustrations we hear from members of the House of Commons and senators is that they are getting a huge number of complaints and do not necessarily have a way of resolving them.

Senator Perrault: Do we tell them to use the 1-800 number instead of looking into it ourselves?

Ms Robson: You certainly have the option of either handling it yourself or referring it.

Senator Perrault: We are all for the success of this new procedure. It is great.

My question is: Does this new bureaucracy diminish the role of the MP at a time when people are trying to trivialize that role anyway?

Ms Robson: I personally do not think so. I think it assists members of Parliament to have somewhere for people to obtain resources. Whereas now there is not the same opportunity, and there is no one to go to on many of these complaints. This could really be seen as a help to your constituents through the members of Parliament.

Senator Finestone: Our friends from Pacific Coastal Airlines Limited, who were here earlier today, brought a complaint about prejudicial service and/or problems on competition and all the related issues. Do they go to the Competition Bureau or do they go to you?

Mr. Currie: I am not aware of any complaint from Pacific Coastal relating to these types of activities. I believe they would correctly take those complaints to the Competition Bureau.

Senator Finestone: How would you determine whether a complaint about a ticket price is valid or not? I will give you an example. Five seats were requested for a flight to Newfoundland. The cost per seat was $620 approximately. They originally purchased two seats. Then the parents decided not to leave the three children at home. They called back the next day, which was the 13th day before the flight. They were told that the fare was $1,100 a seat. This flight was from Ottawa to St. John's.

How do you assess whether the same plane with the same seats, with the reservation being made one day later, the 13th day, has a fair value differential from $620 to $1,100 per seat for five people? Never mind the five people. Do you not find that a bit outrageous? If not, I want to know what pocketbook you use.

Mr. Currie: Airline pricing is very difficult to understand. Yes, I have great trouble with it.

Senator Finestone: I have used the 1-800 number and relieved myself of responsibilities. I have had the member of my riding association who deals with complaints phone you. What will you do with this complaint?

Mr. Currie: First, I can sympathize with it. The competitive environment here, and around the world, has led to this kind of fare structure.

Senator Finestone: F-A-I-R?

Mr. Currie: I was thinking of F-A-R-E. About eight or nine years ago, American Airlines introduced what was called "common sense pricing." They changed the fare structure to contain three different fare levels B economy, and two discount fares. It lasted a week before the competition from other carriers was such that they were losing too much business because they were being undercut. They could not maintain it any more.

Competition has led to a very strange set of fares from the consumer's point of view. I find the same problem. It is very strange to pay $3,000 to go to Vancouver if I do not stay Saturday night. If I stay over a Saturday night, it costs $600. It certainly seems very strange, but that is what competition has done.

In terms of your constituents, there is not much we can say if it is a route where there is competition. This is the kind of fare structure that has evolved. Certainly in the past, there would have been more than one carrier going from Ottawa to St. John's. In the future, there may not be. I suspect that there is more than one now.

Senator Finestone: You are right. They told me that the competition, which was Canadian, is no longer there. Both Air Canada and Canadian Airlines had added a flight over the summer. Now there is only Air Canada, and they are adding only 36 seats. There is really tight competition for seats.

Mr. Curry: Let us assume it is a monopoly route. We would then serve the complaint on the carrier. We would ask them to justify the fares in comparison to a route where there is competition. They would need to demonstrate that they had a similar pricing structure there. Presumably they have a series of prices with different thresholds -- perhaps one is 10 days ahead of time.

There will be a series of price structures that should be similar to routes where there is competition. If so, then the complaint would be dismissed. If not, we would take it further and have the carrier explain why they are using an unreasonable set of fares on this route, where there is no competition, as compared to one where there is competition.

Senator Finestone: How long will it take before you get around to that?

Mr. Curry: If we find that the fares are unreasonable, there is action that we can take. We could require them to roll fares back, and actually require reimbursement in certain circumstances, if it is practical. We could require them to put in additional fares. There are remedies in the agency's act.

Senator Finestone: How do you justify a regular fare of approximately $850 return during the week from Toronto to Chicago, when regular fare from Cleveland to Chicago is approximately $100? Where is the difference? The difference in distance is insignificant.

What do you do with that? Same airline, only one leaves from Cleveland and flies to Chicago, and the other leaves from Toronto and flies to Chicago. The difference in price is outrageous.

Mr. Currie: I do not know.

Senator Finestone: I want to know what you would do if I phoned in with that.

Mr. Currie: I do not think that there is much we could do about it.

Ms Robson: You are talking about a highly competitive route. We have absolutely no powers to do anything about that. The assumption is that people have a range of choices in that marketplace. We have no power.

Senator Finestone: One should drive to Cleveland instead of flying out of Toronto, is that it? It is hard on business people. Thank you very much.

Senator Spivak: There seems to be something contradictory here. First you said that you would compare it to a route where there is competition. Now you are saying that you cannot compare it. Do you have you a price per mile?

Let's take Newfoundland. Will you look at another situation where there is competition, and look at the cost per mile? The answer given by Ms Robson seems to be contradictory.

Why should it not apply from Cleveland to Chicago, if it is applying from Ottawa to Newfoundland?

Mr. Currie: First, we are dealing with domestic prices.

Senator Spivak: Cleveland to Chicago is a domestic price.

Mr. Currie: It is not in Canada.

Ms Robson: The difference in the examples is that we are assuming that Ottawa to Newfoundland is a monopoly route. We have certain powers and certain remedies for monopoly routes. If you are talking about an international, highly competitive route, such as the Cleveland example, we have no powers at all.

Senator Spivak: Toronto to Chicago is a competitive route. The Competition Bureau would have no power there either?

Mr. Currie: Yes.

Ms Robson: The assumption is that the marketplace takes care of it.

The Chairman: Thank you very much.

Our next witnesses are from the office of the Commissioner of Official Languages.

[Translation]

I would like to welcome Dyane Adam, the Commissioner of Official Languages, Jean-Claude Le Blanc, Director, Policy and Liaison, Gilbert Langelier, Director, Special Investigations, Recourse, CEAC, Alternative Methods, and Johane Tremblay, General Counsel, Director of Legal Services.

We apologize for making you wait. We are very happy to have you here and we are now ready to hear your presentations.

[English]

Ms Dyane Adam, Commissioner of Official Languages, Office of the Commissioner of Official Languages: I thank you for hearing me tonight as part of your examination on Bill C-26.

In the brief that I submitted to your committee on November 8, 1999, when you were considering the future of the airline industry in Canada, I recommended that the government ensure that the Official Languages Act, in its entirety, continue to apply to Air Canada, regardless of its new structure, or to any future "dominant carrier." At the time, we did not know whether it would be an Onex takeover or a new Air Canada.

I insisted that the regional carriers and other subsidiaries linked to this entity be subject to Part IV, Communications with and Services to the Public, Part IX, Commissioner of Official Languages, and Part X, Court Remedy, of the act. In addition, I noted that because of the present situation, the federal government had a unique opportunity to give linguistic duality its rightful place in this important sector of activity of Canadian society.

[Translation]

This stance of mine, it goes without saying, was taken against the background of major transformations of the federal administration occurring for over a decade. These transformations had contributed to what we had described as "a subtle but cumulative erosion of language rights" across the country.

By privatizing, transferring or devolving its activities and programs, the federal government had acted pragmatically, on a case-by-case basis. It had not always respected the acquired rights of the official language minority communities -- for example, in the context of the Contraventions Act -- or those of the federal employees affected -- in the case of the federal-provincial agreements on labor market development concluded under the Employment Insurance Act.

Our study of the impact of federal government transformations on official languages programs was published in 1998. At that time we extended to all government transformations the five principles that, in our view, should guide any evolution. Allow me to remind you of the gist of these principles.

Any federal institution that signs a delegation agreement with a province must ensure, at the very least, that this agreement provides for: first, clearly guaranteeing the members of the public concerned the right to services as stipulated in the act and official languages regulations; second, a mechanism for adequate remedy and, if appropriate, redress of the situation; third, effective accountability and control mechanisms; fourth, a commitment to support the development of the minority official language communities, to consult those communities with regard to their needs and to take concrete measures accordingly; and fifth, protection for the existing language rights of federal employees.

[English]

These principles were designed to prevent any further erosion of language rights in Canada. However, the overriding principle that must guide the actions of Parliament and the Government of Canada goes well beyond the preservation of existing rights. The overriding constitutional principle is that of advancement towards equality of English and French and the vitality and development of the official language community, in particular those who are in a minority situation.

At first, the Department of Transport's bill on the restructuring of the Canadian airline industry seemed to fly in the face of this principle. We, therefore, had to intervene immediately, as we did at the administrative and political levels of the government.

Your committee lent an attentive ear to our intervention in the public arena and once again reaffirmed its historic role as a protector of minorities. Needless to say, I was pleased with your recommendation on bilingual services in your report of December 1999. Since then, the situation has evolved very quickly.

In February, we were pleased to learn of the federal government's decision to reaffirm Air Canada's linguistic obligation and to clarify those that apply to its air carriers. The bill tabled by Minister of Transport David Collenette confirmed that Air Canada remained subject to the whole of the Official Languages Act.

[Translation]

Bill C-26 provides that linguistic obligations with respect to service to the public apply not only to subsidiaries wholly owned by Air Canada, but also to any subsidiary of which it holds 50 per cent plus one of the shares. Canadians will also be able to lodge complaints with the Office of the Commissioner of Official Languages if they believe that Air Canada and its subsidiaries are not meeting their linguistic obligations. By legislating in this way, Parliament gives effect to the principle of advancement toward the equality of English and French set out in section 16, subsection 3, of the Constitution Act, 1982.

It is also against this background that we must now approach the very real and legitimate concerns that have been publicly expressed, notably by the Association des gens de l'air du Quebec, and the new suggestions being made to further improve the language provisions of the Bill by including provisions on the use of English and French as languages of work and on the equitable participation of English-speaking Canadians and French-speaking Canadians.

It will be recalled that in the federal administration, the language of work regime applies in the National Capital Region and in the so-called bilingual regions designated for this purpose in New Brunswick, Quebec and Ontario. Moreover, Part VI of the Act is intended to ensure that English-speaking and French-speaking Canadians have equal opportunities for employment and advancement and that:

The composition of the workforce of federal institutions tends to reflect the presence of both the official language communities of Canada, taking into account the characteristics of individual institutions, including their mandates, the public they serve and their location.

[English]

In addition, it is a fact that, year after year, Air Canada shows poor performance with respect to the application of the Official Languages Act. Air Canada has often held first place for the number of complaints over the past 30 years. We still continue to investigate numerous issues of service to the public, as well as complaints related to language of work and participation. With regard to its regional carriers and present subsidiaries, we currently have very little information on the linguistic situation of their employees. To manage effectively, it is indispensable to have complete and reliable data, and this is not the case at present.

Air Canada's Official Languages Act application scheme needs to be strengthened considerably.

A particular accountability framework for Air Canada is required during this period of implementation of the new structure in the corporation. This framework involves the act in its entirety. With regard to service to the public, I expect concrete measures to ensure service of equal quality in each of Canada's official languages at airports and aboard flights with significant demand. Regarding language of work, I propose that there be a visible commitment by Air Canada's senior management to establish an environment conducive to the use of both official languages in the new corporation in the bilingual regions. With regard to the equitable participation of the two linguistic groups, it is essential that Air Canada introduce a better and more reliable system for gathering official languages data from its employees and that the Treasury Board Secretariat monitor this situation closely.

None of this is new to Air Canada. Such a framework should have been put in place long ago and should be part of the business plan for the transition. It will be all the more important to implement it given the new structure of Air Canada. I propose this framework as an evaluation parameter for the independent observers, who will monitor, among other things, the implementation of Air Canada's linguistic obligations. Your committee may wish to make specific recommendations in this regard.

[Translation]

Based on our experience with Air Canada, we feel that legislation alone is no guarantee that the carrier will respect the language rights of Canadians. To ensure compliance, a new stringent accountability framework in terms of linguistic obligations is needed.

The new Air Canada will have to change its attitude and in future meet its linguistic obligations in a pro-active manner. Linguistic duality will have to have an important place in the organization's culture. This seems all the more necessary because, by integrating the employees of Canadian International, Air Canada will have to meet the challenge of full compliance with the Act with a workforce with a proportionately weaker bilingual capacity and a small percentage of Francophones.

In conclusion, I am delighted that you are taking the time to examine this bill in depth. Personally, as commissioner, I am very concerned about the legacy of government transformations. In issues involving Canada's official languages and the protection and vitality of Canada's linguistic minorities, your vigilance is indispensable.

If the Official Languages Act and the linguistic provisions of the Constitution Act, 1982 are not respected by the new Air Canada, the minister may have to return to this committee to defend new legislative proposals designed to tighten Air Canada's linguistic obligations.

The Chairman: What means can you employ to ensure that Air Canada meets its obligations? Can you explain to us in detail how the famous rule "where numbers warrant" works in the context of the Official Languages Act? If I understand what you are saying, you are not entirely satisfied with the measures included in Bill C-26 and are proposing steps to improve monitoring mechanisms.

Ms Adam: The relationship between the Office of the Commissioner of Official Languages and Air Canada is the stuff of which novels are written. Very soon after it was privatized in the 1980s, Air Canada, even though it was fully subject to the Act, displayed an unwillingness to cooperate. This was observed by the commissioner's office and criticized on several separate occasions in different reports. This unwillingness to cooperate manifested itself in various ways, ranging from a reluctance to cooperate with investigations of complaints to a failure to acknowledge that wholly-owned subsidiaries were bound by the act's provisions.

To this day, the Office of the Commissioner continues to receive letters from Air Alliance, Air Nova and all other Air Canada affiliates claiming that they are not bound by the Official Languages Act. Therefore, the Commissioner' s Office cannot investigate the complaints it receives from the Canadian public.

What mechanism can you invoke to get Air Canada to comply with the legislation? We do manage to investigate the complaints filed against Air Canada, the parent corporation. We process these complaints in the same way that any complaint against a federal institution is handled and make any necessary recommendations. Mr. Langelier can explain to you further the "where numbers warrant" rule.

The Chairman: How does this rule work?

Mr. Langelier: These rules are defined in regulations adopted by the government further to the Official Languages Act of 1988. The expression "where numbers warrant" means different things for different types of federal institutions. We feel that this rule applies, in the case of Air Canada, to all of the country's major airports such as the facilities in Vancouver, Edmonton, Winnipeg and Calgary.

Another series of rules applies to in-flight services. In the case of flights within Quebec and flights between Quebec and New Brunswick and Quebec and Ontario and certain flights originating in Quebec to a number of large cities in Western or Atlantic Canada, the numbers rule also applies.

[English]

Senator Forrestall: Among others around this table, we were somewhat incensed to hear the other night that an opportunity to correct a serious error was not taken. The result was that the very real principles that we debated at great length in this country, principles that were brought into law some years ago, were greeted as a matter of regret. That is why I welcome the strength of your words tonight. If Air Canada does not feel a little ticked off, then it had better get some new management. If you had read to me a lecture like that, I would have gone out under the table with my tail between my legs and had a meeting tonight. We would be doing something different at seven o'clock tomorrow morning.

I welcome your appearance. I hope you will monitor very closely what they are doing. It is very important. It is important in a much broader context. We here in Parliament are guilty in a very serious way. Maybe you should look at us. We avoid sending on the road formal committees that require the facilitation of official languages, because it costs too much -- but we do it anyway. I do not think the information is more valuable than the principle. With that, I will ask someone else to proceed.

Senator Callbeck: In terms of the Official Languages Act, you have said that Air Canada has held first place in the number of complaints over the past 30 years. When there is a complaint, you investigate it. Do you not have an enforcement mechanism, to make them do something about the complaint?

Ms Adam: Not really, in the sense that we cannot use coercion. The only thing we can do beyond recommendations is to bring the problems to Parliament, something that we have done for many years. I must say that it is not only the fault of Air Canada. If we look at the participation part on the obligations of Air Canada to ensure that there is equitable representation of French- and English-speaking members in their society, Treasury Board is responsible to develop the accountability framework. In fact, Treasury Board has been pretty loose on that. I have not asked Air Canada to submit data on this issue. Presently, we are in a situation where we are having figures being thrown on the table by different people, but we know and we have been told that they are not reliable. Air Canada is probably the only one that does not know the first language of their employees. While they need to get their act together, on the other hand, the government, through Treasury Board, also has a responsibility and it has not taken it.

The commissioner's office is very anxious about the responsibility that Treasury Board is taking for future devolution. At Treasury Board, we are developing a framework for future devolution. It is still very weak on two aspects: one linked to language of work and the other linked to equitable representation of the two linguistic groups. We are talking about within the federal institution. Your vigilance tonight will be needed in other legislation and in future devolution and transformations that are already on the table.

[Translation]

Senator Roberge: When you last appeared before the committee, you made some very useful suggestions which helped us achieve some of the goals that we had set. As you so aptly put it, there are still a few problems to be resolved and since the Office of the Commissioner has considerably more time to focus on these matters, I am a little disappointed to note a lack of substance here.

We discussed the situation of Canadian International with the Gens de l'air. We seem to be in a kind of grey zone. Until such time as the merger takes place and Canadian International becomes an integral part of Air Canada -- without discounting the possibility that Air Canada might decide to keep the two entities separate -- Canadian International is not bound by the provisions of the Official Languages Act.

It is our intention -- and unfortunately we are a little far along in our consideration of the bill -- to contact the minister to encourage him to achieve this objective as soon as possible. Would you care to comment?

Ms Adam: Perhaps I may have misunderstood you. You did say that Canadian International is not bound by the Official Languages Act.

Senator Roberge: Not at the present time. The new bill does not guarantee a merger between Air Canada and Canadian International. It is possible that Air Canada will manage the two carriers separately and if ever this matter is not resolved quickly, we will encounter some problems.

Ms Adam: There may be problems with certain provisions of the act, but as things now stand, under the new legislation, Canadian International will be bound by the portions of the act that pertain to services to the public and recourse before the Office of the Commissioner.

Senator Roberge: The carrier will not, however, be bound by the provisions of the act respecting equitable representation. Is that what you are saying?

Ms Adam: That is correct. You mentioned that the Office of the Commissioner enjoyed broad powers. We have the power to take legal action to force Air Canada to comply with the act. Currently, there are three cases pending against Air Canada.

Senator Roberge: The fact of the matter is that since 1975, Air Canada's performance has not improved. Despite all of the promises made at the time, its record on this front has deteriorated. Has the Office of the Commissioner of Official Languages taken any action against Air Canada since the 1980s?

Ms Adam: We began taking action against the corporation in 1990. In a 1997 reference, we challenged Air Canada's refusal to acknowledge that all of its affiliates were bound by these linguistic requirements and obligations of the Official Languages Act. The case is still before the courts.

Senator Roberge: And you have not had any successful challenges since then?

Ms Adam: As I said, the case is still before the courts. Considerable legal wrangling is delaying the process, a clear sign to us that Air Canada does not have a good record on this front and is not a good corporate citizen when it comes to upholding the principle of linguistic duality. Even though Air Canada is telling us today that it will change its ways, this calls for a leap of faith on our part, given the corporation's record of compliance with the Official Languages Act.

Senator Roberge: In defence of Air Canada, I would just like to say that when Mr. Janniot headed the corporation, some progress was noted. Unfortunately, the situation has since deteriorated.

[English]

Senator Finestone: Commissioner Goldbloom has brought to our attention the inequality of the workforce in Air Canada since 1987 or 1988. There has been progressive improvement. Treasury Board has a new system inside. They have two new commissioners who are supposed to be watching this. Ms Robillard indicated that there is a careful watching brief in all areas where there is an obligation to reflect the equity principle.

Are you not satisfied with the necessary steps and the goodwill and good intent that has been demonstrated through Treasury Board, through the minister herself, through the undertakings of Marcel Massé before he left, the two studies that were done, and the staff people who have been hired and put into place? Do you not feel that you are now moving ahead? I certainly think there is a significant change since section 7 came into play.

Ms Adam: There have been changes. I met Ms Robillard since she came on board. There is a definite commitment on her part to ensure that the controls will be in place so that any devolution or transformation in government should ensure that we sustain the existing linguistic rights. However, Treasury Board is still in the process of developing such an accountability framework. I am meeting Ms Robillard tomorrow on different issues, as well as this one. I intend to tell her that, in this proposed framework, there are areas that are not strong enough, in particular, the question of language of work and equitable participation. Those guidelines will be given to all the departments to direct them in future devolution or transformation.

So, yes, there is an increased awareness of the problems through the different studies. We have the reports. Treasury Board has studied them and has published different reports in that respect. They have intervened at different levels in the departments, including the deputy minister level.

We need to be vigilant. The framework proposal tells us that there needs to be improvements.

Senator Finestone: Will you recommend to the minister that there be amendments to this proposed legislation?

Ms Adam: I was talking generally, not necessarily about this legislation.

Senator Finestone: Have you addressed this legislation?

Ms Adam: The aim of my intervention is that this proposed legislation must be accompanied by a rigorous accountability framework for Air Canada.

Senator Finestone: In regulation?

[Translation]

Ms Adam: Yes, in the regulations. However, this could also be done within the context of the accountability framework devised by Minister Collenette who has already put in place a monitoring system involving two observers. If these observers could rely on a sound management and accountability framework clearly setting out the observations to be made and the facts to be collected, your committee and the Commissioner's Office would then be able to apply to this new corporation the necessary mechanisms and measures to monitor its compliance with official language requirements.

If we could put in place this kind of accountability framework during the transition period, this would not only help to ensure compliance with the linguistic obligations, but would also make it possible to identify Air Canada's shortcomings. And if Minister Collenette return in a year or two to propose adjustments or amendments to the act, you would then have the information you need to justify any changes.

Senator Finestone: The reason I asked you this question is that we are currently examining another bill that also involves regulations. I have not heard anyone recommend changes to the regulations or to the bill as such. If I understand correctly, provided the parties are patient and given the renewed goodwill on the part of minister, the whole process will take two or more years to complete. Am I correct?

Ms Adam: Yes. Let me say that the bill is by no means perfect. However, when we review a case such as Air Canada's or that of a new entity that has been created, it is important for us to verify compliance with principles. In terms of acquired linguistic rights, is any ground being lost? The answer to that question is no. The new bill safeguards existing rights.

Does the bill respect the major principle that I spoke of earlier, namely the advancement toward the equality of the two languages? Considering that the bill provides for the merger of companies which were not subject to any linguistic obligations, it represents a step forward for linguistic rights in this country.

The bill provides for some positive changes and safeguards existing rights. However, I agree that the legislation is by no means perfect. It makes no provision for subjecting Air Canada in its entirety to the act and this has prompted you to wonder, as legislators, if anything further should be done. With respect to principles, the Commissioner's Office views the legislation as a step forward. We would like all bills to have the same effect and to maintain acquired rights. Unfortunately, that is not the case.

Senator Finestone: I think you have conveyed your message.

[English]

The Chairman: Senator Finestone, nothing prevents us from making observations to the minister when we proceed to clause-by-clause consideration of the bill.

Senator Finestone: I would support that.

Senator Joyal: I should like to remind my colleagues who may not have been involved in the public debate of 1976 that when the Commissioner comes to us and says that we do not have the means to enforce the objectives of the Official Languages Act that the act, at its origin, did not even provide for its enforceability. The first case to test the enforceability of the act was litigation against Air Canada in 1976 that I undertook myself.

Air Canada and the Government of Canada were contesting that the legislation was compulsory. They thought the Commissioner was only someone to express "pious wishes."

For the last 24 years, there have been some presidents of Air Canada, Mr. Jeanniot was one of them, who really understood that it was helpful for the business of the company to be a good corporate citizen. Mr. Jeanniot took significant initiatives to redress the perceptions that Canadians had of Air Canada.

I must also tell you that, since then, it has been awful; it has been very unacceptable. We are not speaking about productivity. We are not speaking about improving the corporate image of the company. We are speaking about two fundamental principles that are entrenched in the Constitution of Canada.

Madam Commissioner, I sense that you are betting on the future, in the hopes that one day it will be better. We all know that it will not be better. We have been told that the statistics for Air Canada pilots in 2000 are the same as in 1978. We are back to the future. If we add Canadian Airlines to that, the figures are equivalent to 1965.

We must be serious. Do we wish to respect legislation, yes or no? Is this a constitutional principle, yes or no? Must we wait until Canadian citizens come to us and make complaints and drag Air Canada into court as I did?

When I expected the 12 pilots to join me in my suit against Air Canada, they came to see me and said: "Mr. Joyal, we cannot be petitioners with you. We have mortgages, car payments, and credit cards to pay. We have families, and this action will cost $150,000. We cannot be petitioners because we will be responsible for $10,000 or $15,000 each."

They said that unless someone relieved them from the financial responsibility they would not be petitioners. I prepared a legal form saying that I would be assuming all legal costs. I relieved them of any financial responsibility for the action. I was suing Air Canada, using the best legal mind in Montreal -- although I will mention no names at this time.

You should not have to force Canadian citizens to be heroic and maintain and observe the fundamental principle of equality of language that has been entrenched in the Constitution since 1980. I do not buy that.

Madam Chair, I read this presentation, and I read between the lines. If we want, as a body, as a house of Parliament, to be responsible for protecting minority rights, we must assume this responsibility with Air Canada in a much more acute way. We should not expect that people who are aggrieved, like the pilots and technicians and the people who work at the ticket wickets or the desk and whatever, will one day be heroic and take action against Air Canada.

[Translation]

It would be an abdication of our public duty to allow the situation to go on without amending the legislation and without obtaining better guarantees than we now have. All of the signs point to the fact that this is not working.

While the problem of the subsidiaries that you raised is addressed by section 18.1, other problems remain unresolved. With respect to services, the problem will be accentuated by the fact the there will be an increase in the critical mass of unilingual employees. It will be increasingly difficult to offer service in both languages. I can predict what will happen down the road: the number of complaints will not fall off with the merger of the two companies. On the contrary, complaints will increase because no one will be able to manage the situation. We need to be very aware of this situation. Believe me, I have already given the matter a great deal of thought.

When they testified before the committee last Monday, the Association des Gens de l'air du Québec asked us to amend the draft legislation. I came to the realization that this was another case of the government waiting for Canadians to complain before ensuring compliance with the legislation and that had there been no complaints, it would have assumed that the situation was satisfactory. Surely this is not the way to build national unity.

As you noted, this extremely important bill is symbolic of what we see every year. It is always the same old story. In your report, we always note that Air Canada is the target of the largest number of complaints. Either we are masochistic or irresponsible, but goodwill alone will not get the job done. According to the observations made by senators Bacon and Roberge earlier this week, it is critically important that the situation be tightly monitored, or else Air Canada will simply disregard the legislation.

Let me recall for you another incident that occurred in 1988 when I was on a flight from Toronto to New York. While adjusting the console buttons to get the news, I realized that the reception was in German and in English. When I asked one of the flight attendants why the reception was in German, I was told that many of Air Canada's customers were now German, hence the service in German. I replied that Canada's other official language was French, not German. Customer satisfaction was the explanation I was given. I had to call the Deputy Minister of Transport to advise him that unless he informed the President of Air Canada -- at the time it was Mr. Harris, an American - that Canada had two official languages, I would pursue the matter with the courts and that such action would certainly not help the company's corporate image. In my view, we must avoid confrontations of this nature which in no way contribute to national unity.

Madam Chairman, in 1976, you saw first hand the impact of the crisis generated by the Association des Gens de l'air under the Parti Québécois government. We are all familiar with the events that transpired. This has serious implications for national unity.

The Chairman: We know that this did not help the Liberal Party's cause.

Senator Joyal: It certainly did not help Mr. Bourassa. Commissioner, it my fervent hope that until such time as we proceed to the clause-by-clause study of this bill, you will stay in touch with the chairman and committee members and offer comments that are more than mere pious wishes and noble intentions. We know that these do not get results. The legislative provisions need to be tightened further to address the specific problems resulting from the merger of these two companies. I predict that Air Canada is going to have a hard time improving what I already consider to be an unacceptable performance record.

I realize that this is a recurring problem. It is somewhat like a bad headache or allergies that act up every spring.

The Chairman: The commissioner has proposed a number of options in her presentation. If you have any further comments, Ms Adam, I invite you to share them with us.

Ms Adam: I would like to respond to Senator Joyal's comments, so that everyone understands me clearly. I am not here this evening simply to express some pious wishes. I am telling you that there have been some very serious problems observed within Air Canada. Before the establishment of the new Air Canada, the legislation was clear and yet, compliance was a problem. This proves that legislation alone is not enough and that substantial administrative changes are needed.

As legislators, you have all of the available tools to establish an accountability framework, something that is virtually non-existent at the present time. In this endeavour, you can rely on the full cooperation of the staff of the Office of the Commissioner of Official Languages.

I have also been informed that the bill, as drafted, makes provision for possible amendments in the months ahead. If this framework is closely monitored, you will have all of the elements that are missing today to make specific recommendations for amendments.

Not that we want to give Air Canada carte blanche, but this new reform must include tighter provisions, and not merely legislative ones. Above all, Air Canada must develop a different organizational structure, take the Official Languages Act seriously and take steps to gather the information required for compliance, contrary to what it now does.

The Chairman: Thank you, Ms Adam. If we need information or advice, we will be in touch with you.

The committee adjourned.