Proceedings of the Standing Senate Committee on
Banking, Trade and Commerce
Issue 37 - Evidence
OTTAWA, Wednesday, April 17, 2002
The Standing Senate Committee on Banking, Trade and Commerce, to which was referred Bill C-23, to amend the Competition Act and the Competition Tribunal Act, met this day at 3:35 p.m. to give consideration to the bill.
Senator E. Leo Kolber (Chairman) in the Chair.
[English]
The Chairman: Honourable senators, we are here to deal with Bill C- 23, an act to amend the Competition Act.
Welcome, minister. Do you have an opening statement you wish to make?
Hon. David Michael Collenette, Minister of Transport: Honourable senators, thank you for the invitation this afternoon. I know that you are anxious to conclude deliberations on this bill.
Some Hon. Senators: No, no.
Mr. Collenette: As you know, Canadians rely heavily on the air mode to meet their long-distance travel needs within the country. The needs are great, given our size, our spread of population and the integration of the domestic economy.
[Translation]
To ensure that Canadians have access to different options for air service and receive fair value for their air travel dollar, a competitive domestic market is essential.
[English]
The need to ensure that the domestic industry remains as competitive as possible became evident over the past months. Taking advantage of the fact that Bill C-23 was before Parliament in December 2001, the government introduced two amendments. We believe that these amendments address gaps in the current legislation identified during public hearings held by the House Standing Committee on Industry in November.
The first of these amendments is designed to permit the Competition Tribunal to extend a temporary cease and desist order if the commissioner needs more time to gather or analyse information necessary to support an application for more permanent relief. The second amendment authorizes the tribunal to apply administrative monetary penalties when it has issued a finding of anti-competitive behaviour against an airline. This authority is intended to encourage compliance with the abuse-of-dominance provisions in the Competition Act.
Competition in the airline industry depends heavily on the willingness of new and existing entrepreneurs to begin or expand service in domestic air markets. Entrepreneurs will quickly lose interest if they believe that any dominant carrier will be allowed to attack their initiatives through the use of unfair business practices.
Section 104.1 of the Competition Act provides an essential ability for the Competition Commissioner to issue a temporary cease and desist order if he believes it likely that a carrier is abusing its position on a route.
Any dominant carrier can undermine competition quickly by moving new capacity into the market and by under- pricing its products in an unfair way. This is not like supermarkets, which have physical structures that cannot be moved around. We are talking about movable assets. Planes can be deployed at a moment's notice. Given that, the commissioner needs to be able to act on his own motion in a very timely manner, as provided for by the existing section 104.1. You will note that this proposed section includes safeguards to ensure that the power is not abused, as interim orders are subject to immediate review by the tribunal upon complaint.
The power is not unique to Canada. I should advise you that airline-specific regulations of the European Union authorize the competition authority to issue an interim order against any dominant air carrier to prevent anti- competitive practices.
With respect to the second amendment, which has specific relevance for the airline industry, the tribunal will take into account the circumstances of the case before deciding if an AMP is appropriate, and if so, at what level.
The $15-million maximum administrative monetary penalty is designed as a deterrent and to give a carrier pause before engaging in anti-competitive activity. Thus the airline will take the necessary care to ensure that its actions remain within the parameters specified by law.
[Translation]
In sum, honourable senators, the amendments affecting the airline industry in Bill C-23 will help prevent anti- competitive behaviour and preserve competition in Canada's airline industry. This vital economic legislation will benefit consumers and businesses alike.
[English]
For all of these reasons, I strongly encourage honourable senators to support the bill. I am pleased to take questions specifically on the status of the airline industry since the merger of Air Canada and Canadian Airlines. Thank you.
The Chairman: Senators, I am told that the minister has some time constraints. I would ask you to please limit your question time to 10 minutes each. If we have time, we will go around again. We will let you know when your 10- minutes is up.
Senator Tkachuk: Minister, when you summed up, you said that the amendments affecting the airline industry would help prevent anti-competitive behaviour. Yet you changed government policy. I am trying to get a rationale for the act.
You changed government policy in response to the ONEX attempts to buy Canadian and Air Canada, which if successful, would have created the same monopoly situation, if not a greater one, than we have today.
Why were you not concerned at that time, but you are now?
Mr. Collenette: I am glad you raise this question. There is a lot of misinformation about what happened in 1999. Over the years, Canadian Airlines and Air Canada had informal discussion about merging. It almost came into effect in 1993-94, when Mr. Young was minister.
In 1999, the presidents of both airlines came to me. Mr. Benson and Mr. Durette, who preceded Mr. Milton, wanted to talk about mergers. They both wanted the department to facilitate the process. We had discussions with both airlines. At one point, I thought a deal would be completed.
It was good that they had confidence in the government's ability to facilitate this. In the course of those discussions in March 1999, one of the senior officials from Air Canada raised the possibility of using section 47 of the Canada Transportation Act, which has a controversial provision to remove the jurisdiction the Commissioner of Competition for a certain period of time, to facilitate the merger.
My officials had actually not proceeded down that route. They were intrigued by the suggestion and started to explore that. Subsequently, Mr. Benson informed us that he hoped that because of the failure of the efforts of the two companies to get together under our auspices, we could use section 47 to facilitate a private sector solution.
Using that section of the act would be quite a dramatic step, as it had not been used before. Setting aside the Competition Act was quite controversial. We said we would have to consider it, but they should put their request in writing, which they did.
I must tell you it was a very tough decision. It was taken on the morning of the announcement, which I believe was August 13, 1999.
Subsequently, events unfolded in a way that we did not anticipate. The net effect of using that section of the act was to facilitate a private sector solution. ONEX came along, and then Air Canada made a counter-proposal. ONEX dropped out, but Air Canada, to its credit, decided to proceed. We feel that even though it was controversial, it was a good step. Perhaps I could take responsibility for not explaining it sufficiently. However, the government became the meat in the sandwich between two rival bids.
As you know from business experience, senator, takeovers and mergers — corporate battles — can get to be ugly affairs. In this case, the government, by virtue of facilitating this process, was caught in the middle.
It was somewhat messy. However, it turned out to be in the best interests of Canadians when Air Canada decided to proceed with their counter-offer.
Senator Tkachuk: I am somewhat confused. Was section 47 changed after the merger talks failed?
Mr. Collenette: Yes.
Senator Tkachuk: Did the talks fail and then you decided to take this action? By then, was ONEX ready to go?
Mr. Collenette: I do not have the specific dates, but at a certain time, Mr. Benson said that he had outside investors and wanted to facilitate a private sector solution. Mr. Manley, who was then Industry minister, and I received a letter requesting the use of that particular section.
We debated that. However, we felt that we could not bring them together around the table; therefore, we really should try to let the markets decide.
In other words, the government stepped back, provided for the process under section 47, and watched what happened. The rest is history.
Senator Tkachuk: I have a couple of questions, and hopefully I will have time to return to that area. There are some things about which I am not quite sure.
ONEX failed. As you said, it was somewhat of a messy situation. Air Canada then purchased Canadian, creating an effective monopoly in the Canadian airline industry.
Why is this proposed legislation so urgent now? Why was it not urgent then, when a monopoly situation was effectively created?
Mr. Collenette: After ONEX withdrew because of the Quebec Superior Court decision, Air Canada's board, to its credit, decided to proceed with their counter-offer. The government had some options. We could have bailed out Canadian Airlines. Mr. Benson had said that he wanted $100 million before February 1, which gave us all heartburn. We could have allowed Canadian Airlines to go bankrupt and Air Canada to take up all international routes. The government would have had no choice but to allocate all the international routes to Air Canada and pick up the rest of the domestic market. You still would have had Air Canada in a dominant position, but you would also have had 16,000 people out of work.
The other option was to accept Air Canada's offer and try to negotiate some mitigating measures to ensure some kind of balance. I must remind you that on December 21 1999, Canadian Airlines had two days' cash left. They could not meet payroll on December 23. There was no capacity, both domestically and in the United States, to pick up all the Christmas flow. We would have had an absolutely chaotic situation, plus 16,000 people out on the street. We welcomed the Air Canada board's decision to proceed.
Contrary to what some say, including Air Canada, we did not make them do it. The board of directors made a conscientious business decision and we welcomed that. My deputy minister, Margaret Bloodworth, and Mr. Von Finckenstein, the Commissioner of Competition, were detailed by cabinet to act as interlocutors to put the deal together. Frankly, the government was not in that strong a position, wanting, of course, the best of the situation, because Air Canada could have walked away at any time. Air Canada did make some concessions contained in a letter of commitment, I believe, signed on December 21, which were entrenched in Bill C-26. That became law. Air Canada has, to its credit, followed the law and those commitments.
We also, in Bill C-26, which the Senate passed unanimously, brought forward measures to deal with predatory behaviour, the use of excess capacity to swamp a particular carrier. You saw those amendments, which the Senate passed unanimously in June 2000. That was all part and parcel of the government's response to the merger.
Certainly Air Canada made some comments at the time. I think they appeared as witnesses both to the Senate and the Commons committee. They understood that there had to be some constraints on a virtual monopoly.
The provisions are good. There are a number of applications — the commissioner has outlined this in a letter to the chairman that I read recently — but they were only used once, in the CanJet case. It is not as if these ex parte applications are used on a whim. It is a serious matter, and there is recourse to the Federal Court to challenge it. Air Canada did that, and the Federal Court of Appeal upheld the commissioner's right to proceed.
We said to the commissioner, after the failure of Canada 3000, ``We will be back in the same situation of 80 per cent market share for Air Canada. Are there any other powers that you need to ensure a level playing field for competition?'' The commissioner came forward with the amendments that are before you today.
Senator Tkachuk: The price of saving Canadian Airlines may have given you heartburn, but did the two Challenger jets for the equivalent amount of money do the same?
Mr. Collenette: I am not sure that is germane to this particular discussion, but the senator has obviously made his point.
Senator Tkachuk: That is good.
Senator Kroft: It will be obvious to you, minister, having followed the hearings of this committee closely, that amongst many other things, there has been a particular interest, and I might even say a ``preoccupation,'' with the provisions of proposed section 104, particularly 104.1, giving the ex parte power to the commissioner. My question will focus on that particular point.
You mentioned in your introductory remarks that the power granted is not unique to Canada. You mentioned that a similar power exists in the EU. I have no knowledge of the details of that. Nevertheless, whether or not it exists in the EU and in the same form, I think it is fair to say that many of us on this committee are somewhat uncomfortable with the extraordinary powers granted under that provision. I am trying to understand that power in the context of the development of a national airlines policy for Canada.
I will say, in passing, that it appears that the only reason for giving the right to the commissioner to act in the first instance, without reference to the tribunal, is the need for speedy action. I might say that we have heard very credible and conflicting evidence at this committee about just how critical that is, how much time is lost, whether it is one, two or three days, and the consequence of that.
I have not been overwhelmingly persuaded that, as a matter of policy, there is a worthwhile trade-off between the time lost and the power given. However, I will describe that as scepticism.
I would like to know whether you see this power as a permanent part of the airline environment, or whether you see it as a — from my point of view, let me say — a necessary evil, as a transition measure, and something that has to be done right now in the absence of other established policies or practices within the framework of an airline policy.
Mr. Collenette: Senator, Bill C-26 was always described as a statutory framework for the transition after the merger. I always talked about a two-year transition, which would have ended December 31, 2001. We might have been having a different discussion, or I might not have been here today, if the tragic events of September 11, which caused the bankruptcy of our number two carrier, had not occurred. On September 10, it had its biggest booking day in history. The 82-per-cent market share of Air Canada and Canadian at the time of the merger in December 1999 had fallen to around 61, 62 or 63 per cent after September 11.
The two-year transition, I would submit, is being extended. For how long, I do not know. I would hope that this kind of provision would not be necessary in the long term. However, it is certainly necessary now because the transition was rudely affected by the events of September 11. Thus, we do need to provide an environment so that airlines such as WestJet — and, of course, CanJet yesterday announced they are returning — can get into the marketplace, especially in Eastern Canada, where competition is weak. I do not necessarily see this as being permanent. The law can always be changed.
Senator Kroft: Thank you. I will leave it at that.
Mr. Collenette: Yesterday, Mr. Rowe, the president of IMP, said that the relaunch of CanJet was motivated by the federal government's new laws to allow airline competition in Canada. I talked with him last Thursday, and he said, ``Mr. Collenette, we are going to take another shot at this because we have seen the new amendments to C-23 and believe that this encourages competition.'' I felt that his announcement yesterday was timely, given the fact that I was coming to the committee today.
Senator Oliver: Regretfully, the question I intended to ask has been partly asked by Senator Kroft. However, I wish to make a few comments about it, minister.
Normally, competition law should not be used to regulate a specific company or for airline industry regulation, which should be through economic framework law. In general economic framework law, there is normally a provision stating that, ``After two, three or four years, this law will come back before both Houses of Parliament for a review.''
Would you be in favour of an amendment to this proposed framework legislation to ensure that we do not have to wait for 20 years to have something as important as competition policy reviewed by the Parliament of Canada?
Mr. Collenette: On the issue of this as a regulatory measure in the airline industry, with great respect, it is not accurate to say it is being used on one particular company. I know, however, that Air Canada feels that it is that way. In many markets in Western Canada, WestJet is the dominant carrier. It is not inconceivable that Air Canada, as the second carrier in certain markets, could benefit from the use of this power, as could other airlines in the country. We always think about just Air Canada and WestJet, but there are about 600 airlines. There are a lot of smaller ones. There is competition in the North.
In other words, yes, this was introduced because of the merger, and yes, at the time, Air Canada had an 82 per cent market share. However, we believe that the provision in the act and the competition coming on helped to reduce that market share. We hope that that will continue. It is not specifically directed at Air Canada, although I suppose they feel somewhat sensitive about it. It is not inconceivable that, on a city pair such as I have described, for example, in Western Canada, they could use it against WestJet. That is unlikely, given WestJet's cost structure, but it is not entirely impossible.
Senator Oliver: I understand your point.
Mr. Collenette: You made another point?
Senator Oliver: Yes, about the proposed framework legislation containing a clause to permit the Parliament of Canada to review this after a specific period.
Mr. Collenette: I will be frank with you. If this bill is amended, it goes back to the House. That will make it difficult to get the law proclaimed in time for the new entrants that are coming on and to protect the WestJets that want to expand. This is why I would encourage you to accept the bill as is.
Having said that, we may be able to give you assurances that we can review this mechanism in the future. We did this with the Canada Transportation Act and the Canada Marine Act. I believe the Senate has the authority, and has used it quite often, to recommend certain courses of action and to include appendices that are designed to give guidance to the government. In fact, when Senator Bacon reported the bill to the Senate on June 15, an appendix was included. One of the sentences in there was, ``Thus it becomes very important that amendments to the Competition Act included in this bill which would allow orders to terminate such practices,'' — that is, anti-competitive practices — ``result in a process which is quick and effective, backed up by a set of Governor in Council approved regulations that will do the job.''
The Senate said, ``Not only do we agree with the amendments, but put regulations in quickly to deal with it.''
Senator Oliver: I had a hand in that language. However, I would prefer to have something stronger. For proposed framework legislation as important as this, there should be a specific clause saying, ``We will not let this languish for 12 or 14 years and deny Canadian companies an opportunity to have modern competition laws such as they have in other countries.'' It should be in the bill. Give that protection to our companies.
Mr. Collenette: The fact that we propose to amend the act through Bill C-23 only two years after the merger shows that it can be brought forward, if necessary.
I do not think this is a measure that the government, or any government, wants to have permanently entrenched. It is to deal with the unique situation following the merger. As I said to Senator Kroft, there may be a further transition time of up to five years, or perhaps two, three or four years; I do not know. We could agree to re-examine this, depending on how the market goes.
As to the practical effect, I have read Air Canada's testimony through Mr. Baker and I have discussed this at length with Mr. Milton and other members of their board of directors. I know that they feel uncomfortable. However, despite the number of applications that the commissioner received, he only used it once, in the CanJet situation. It is quite obvious from the language that the justice used in the particular application to the Federal Court that if the commissioner were to use this power in a frivolous way, the court would reject it. There is protection there for a dominant carrier on a particular city pair.
We should always review laws after a certain period of time.
Senator Oliver: What are you prepared to do? What kind of undertaking can you give this committee?
Mr. Collenette: This bill is in Mr. Rock's name. It was in Mr. Tobin's name, but I guess I am the bad guy behind these amendments because I have responsibility for transportation policy.
I can agree with what you have said and what Senator Kroft has said, namely, that there should be some way that we can undertake to re-examine this. Ministers can be summoned at any time. If the government gave an undertaking — and I must discuss this with Mr. Rock — then it is duty bound to review the matter, whether or not there is a clause in the bill. There is a moral obligation on the part of the government to undertake a review.
Senator Oliver: Minister, you are very well prepared for this meeting and I know you have read all the testimony. You know that a large number of witnesses have come before us and said that there is no legal or logical reason for clause 103, as clause 104 will do. I am thinking specifically of the testimony of Professor Wong. Can you tell this committee why we need clause 104? What does it add?
Mr. Collenette: Clause 104 allows the commissioner to act quickly — and I believe he said this to you — in an industry where assets can be deployed at a moment's notice.
Air Canada redeploys capacity on an hourly basis. That is why some days, you get a certain configuration on a flight that you are not used to. Sometimes it is a smaller plane; sometimes it is a larger one. That can also occur in the redeployment to markets to compete. Air Canada is the dominant carrier, but it could be another on another city pair.
There are, as Mr. Carr is reminding me, judicial safeguards. Someone from the Federal Court must be made available to hear the application and documents must be presented. The affected parties are not invited to participate, but the tribunal may need to hear witnesses, whose appearance and testimony may be organized. Time will be required for the tribunal to reach a decision. If the tribunal is not satisfied, the commissioner will need to do more research.
All of this will slow it down. I read in the testimony somewhere that it could be done in two days. There is no way that the commissioner could get this kind of application through the Federal Court or the tribunal within two days. That is why he must have what have been described as ``arbitrary'' powers. They are arbitrary powers to deal with the requirements of the public interest.
Senator Oliver: He is the investigator, judge and jury. That is what is wrong.
Mr. Collenette: I know you are a lawyer, and looking at it simply from a jurisprudence viewpoint, you are right. That is the antithesis of the judicial system in this country. However, policy considerations in the public interest in transportation require particular and urgent remedies. Those remedies are subject to the law. They are reviewable by the Federal Court. Frankly, if the commissioner, as I said before, exercised the powers in a frivolous way, the court would throw it out.
Senator Hervieux-Payette: I want you to explain something to me. I am not an expert on the question of moveable assets. It is not a concept that we see in many businesses. Please allow me to ask you a question in French.
[Translation]
I am wondering whether people travel because there are planes or whether the planes are there for people to travel? It is true that planes can change routes, but if there are no passengers, I do not see what a plane would be doing at another airport. So, where does this concept of ``movable asset,'' which would justify the application of such strict rules, come from? Where does a carrier get off on moving its planes if there are not any passengers?
I would like you to explain the concept of ``movable asset,'' because its inclusion in the Act imposes many requirements which do not apply to other sectors.
Mr. Collenette: Take, for instance, a route between two cities which is covered by WestJet. Air Canada could service that route with a larger aircraft and sell seats at reduced prices, not only with the goal of filling the aircraft, but also to eliminate its competitor. The question is not only to find out where the passengers are, but also to pinpoint any type of unfair competition created by the dominant carrier against a smaller carrier.
Senator Hervieux-Payette: The graph distributed to the committee by WestJet outlines factors which generally favour Air Canada as well as Westjet. As a consumer, I am just interested in boarding a plane at my convenience, not at the convenience of the airline.
I have noticed, for instance, that Tango's flight schedule is not very convenient for business people. Departures are too late and arrivals are too early. On regular routes, there are also several departures, irrespective of how full the planes are. I am trying to understand how this would eliminate competition.
Take the case of Air Transat. Business seems to be going well and the carrier does not seem to have flirted with bankruptcy. Do you really think that a carrier could be forced out of business, when the effects of September 11 have greatly subsided and people have begun to fly again. It is as if you wanted to perform surgery on a person simply suffering from a headache. It is like using a sledgehammer to kill a fly.
I have concerns with regard to the section, as has the Canadian Bar. The Canadian Bar does not normally come out in support of one sector or another, but in this case it seems to be saying that if a provision threatens one sector, it may threaten others, so let us apply to every sector.
This type of competitive situation exists in many other sectors. Take the telephone industry, where one company dominates 60 per cent of the market. Or the banking or oil sectors. Don't consumers feel that oil companies are mutually hurting each other when one of them increases its prices at 9:00 a.m. and all the others follow suit at 9:15? I would like to know why the airline business is treated differently from other sectors.
Mr. Collenette: On that second point, Madame Senator, I believe Mr. von Finckenstein gave you the answer and I also answered this afternoon. The airline industry is unique because you can promote and switch aircraft within the space of two or three hours. You cannot do that in the oil or communications sectors, which are based on fixed assets.
On the first point, I must point out that section 104.1 was unanimously passed by the House of Commons and the Senate. What we are doing today is simply making an amendment to add to the Commissioner's powers, powers he received two years ago.
[English]
Perhaps I could explain that also. You talk about your experience, but with great respect, most of us travel, at the courtesy of Her Majesty, on business-class tickets because we have odd schedules that may change at a moment's notice. However, 90 per cent of the tickets sold in the country are on an advanced fare basis. Opinion poll after opinion poll — and we had some done for us two years ago that were made public — showed that what the consumer wants is the best price. The consumer will go with the lowest fares. While you are right with respect to your travel as a business- class passenger, we are unique in the sense that most people are prepared to travel in the middle of the night. They are prepared to fly with Tango or WestJet. They are prepared to go to Moncton from Ottawa via Hamilton. They are prepared to go anywhere if the price is right. It is quite possible for the dominant carrier, for example, Air Canada, to flood the market with seats. I believe that was WestJet's allegation when the Moncton route was opened. That is another issue that they are following at the tribunal, but it was not covered by the cease and desist powers because it was enjoined before the bill was passed.
This is not about the people in this room; this is about the majority of Canadians, who want cheap travel. You look at all the indices, and people want safety, which they get, and the best price. That means that an airline such as Air Canada can redeploy assets because they have the equipment. They have about 350 planes versus WestJet's 28 or 29, although WestJet keeps adding them. They have more flexibility to add capacity and flood a market with seats. It is to prevent this kind of predatory behaviour in this unique situation. I do not know of any other industry in the country where one company has 80 per cent of the market.
Senator Hervieux-Payette: We do not know the exact percentage. Even our Chair told us it was not known if it was 65, 70 or 80 per cent.
Mr. Collenette: I will tell you what it is because Transport Canada regulates the entire industry. Air Canada disputes this, saying they take transborder traffic. However, we estimate that their market share has been hovering, since September 11, around 80 per cent, or just under that. We believe that with the extra capacity of Skyservice, and not factoring in CanJet, by Labour Day it will go down to around 73 or 74 per cent. It is conceivable that it will continue to decline. Air Canada says it is 67 per cent. I will take my own department figures of somewhere in the high 70s over theirs, and that is too much. We need remedies to deal with potential abuses.
Senator Hervieux-Payette: I wish to talk about Air Transat. We have no complaints in Quebec about Air Transat. I wonder why it came from WestJet.
Mr. Collenette: Air Transat is not a scheduled carrier. It is true that they have a limited summer schedule and they fly some planes, as they did over Christmas, to St. John's and Vancouver. They also do deadhead runs in Vancouver, but they are not in a schedule type of business. They are an international charter operation and they will tell you that they want to stay that way.
People in Quebec and the Atlantic provinces, where competition is weakest, will benefit the most from extra competition as ensured by these amendments.
Senator Kelleher: I would like to move us away from our discussion of clauses 103 and 104 and into a brief discussion on the mutual legal provisions contained in this bill.
Mr. Collenette: I think Mr. Rock will deal with that tomorrow. This is not my bill. I am just sneaking in here because of these particular clauses. I am not really competent to answer questions other than on the effect of the Competition Act on the airline industry.
Senator Kelleher: This affects the airline industry — at least it can.
Mr. Collenette: Go ahead, then.
Senator Kelleher: Let me pose the question and then if you want to stick with your earlier decision, fine.
Some of our earlier witnesses were concerned about the potentially negative impact on a business of a Canadian court releasing sensitive business documents to a foreign country, which might then turn them over to a third party in competition with the Canadian business. I suppose theoretically, you could use the example of Bombardier and Embrear in this kind of situation.
Do you or your officials feel that the safeguards with respect to the mutual legal assistance provisions are sufficiently stringent to protect our Canadian business people?
The Chairman: May I suggest, senator, that we accept the minister's caveat on this one? Minister Rock will be here tomorrow. Perhaps you could direct that question to him then. Does that satisfy you?
Senator Kelleher: I have given the minister the option, now that he has heard the question, to venture an opinion on that.
Mr. Collenette: Senator, I get into enough trouble in areas of my own jurisdiction. Mr. Rock should answer that question.
[Translation]
Senator Poulin: I particularly appreciated what you said on the difficult transition period you went through as Minister of Transportation.
[English]
You said that you want, through legislation, to have all the appropriate tools to ensure a totally competitive environment in the industry that you are overseeing. What happened between Bill C-26, which I thought provided all those tools, and this bill? What happened to make you conclude that we needed extra teeth to ensure that it was competitive?
Mr. Collenette: I think the commissioner might have said something like this in his testimony. He needs the amendment to extend the period. In the CanJet case, for whatever reason, the 80 days expired before the tribunal heard it. That then allows the accused, in this case, Air Canada, to resort to the alleged predatory pricing behaviour that began before the cease and desist power was invoked. He believes that there should be a continuation of this power until such time as the tribunal hears the case. The tribunal can agree not to extend it, so there is still a safeguard there.
The second reason is that, having been around this once, we wanted to ensure that we get it right. Having seen that, in practice, the Bill C-26 amendments were not quite tight enough, we wanted to ensure, since the bankruptcy of Canada 3000, that we had this additional authority. I, for one, am puzzled as to why Air Canada has been so strident in their opposition to this particular clause. I had assumed that they would not want to be the victim of predatory behaviour on a route where they were not the dominant carrier. There are some in Canada, especially in the West. I am puzzled by their vehemence on this. I have tried to explain that. In fact, I talked to Mr. Milton a couple of days ago about this.
Senator Poulin: A few minutes ago, you talked about percentage share. Did you want to add something on that?
Mr. Collenette: Yes, Mr. Carr reminded me of something. We have been talking about the cease and desist and extension powers, but the administrative monetary power is another reason. We did not get it right in Bill C-26. We need to have the accused understand that this is serious business and that you just cannot institute predatory behaviour, be convicted and pay a minor penalty that can be written off as part of doing business. We must have a substantial administrative monetary penalty, which is the $15 million. It is not absolute; it is up to $15 million. The tribunal will apply it. However, we believe that $15 million is the maximum that a company like Air Canada, with its revenues, could tolerate. We are not interested in injuring Air Canada, the largest carrier. We do not want to have them behave in a manner, for example, like when we pay parking tickets and say, ``Give me $20 and I will park illegally next week.'' There must be a balance, and I think the commissioner reflected that in his testimony.
Senator Poulin: Minister, I am hearing you say, since you have been with us, that you want to ensure that Canadians are well served in terms of safety and value for their money. I congratulate you, because I can see all the work that you and your officials are doing and this transition is not easy.
You said that Air Canada, according to the statistics, has about 72 per cent of the market and that it is too much. My reaction as a consumer is: Why would 72 per cent be too much? Is 50 per cent too much? Is 40 per cent too much? I simply want our airline industry to work. I want Canadians to be well served and I want Northern Ontario to be well served, but above all, I would like our companies to succeed. What is not enough and what is too much?
Mr. Collenette: These questions should really be addressed to the commissioner. The rule of thumb is that, in any industry, for example, the grocery or retail business, when a company has 35 per cent of a particular market and a merger takes them over that, then they are required to shed assets to correct the balance. We are far away from 35 per cent in this case.
At the time of the bankruptcy, Air Canada had roughly 47 per cent of the domestic market and Canadian Airlines had 33 per cent. Air Canada's market share exceeded the commissioner's benchmark by about 12 per cent. That was viewed as acceptable. I would like to see Air Canada's market share in the 55 to 60 per cent range. Then there would be the critical mass of equipment to offer Canadians a choice.
Before September 11, 75 per cent of Canadians lived within two hours' driving distance of airports where there was choice. We want to return to that kind of situation.
How could Air Canada reduce market share voluntarily? Does the business want to do that? There was one way they could have done that at the beginning, which I advocated and they rejected. That was through being required as a condition of the merger to sell the regionals. Frankly, they were ill-advised to keep the regionals. I do not think the notion that they need the feed, and that would keep them competitive internationally, is borne out by the facts.
On transborder routes, they have 60 per cent of the market because Canadians want to travel with Air Canada. It is a better airline than any of the U.S. carriers. Most Canadians want to travel on Air Canada versus other carriers to Asia or Europe. The only international carrier that really gives Air Canada a run for their money is Air France, operating out of Vancouver, Toronto and Montreal. I believe they have 52 per cent of the Canada-France market.
BA has gone down from 40 per cent to 18 per cent. They are angry about not having the feed. Much of that has to do with their marketing here.
The point is that if they had shed the regionals, they would have had 10 per cent off the top. There are many small carriers in the country that could have gone into places like the Îles-de-la-Madeleine or Northern Ontario. Senator, you are from Northern Ontario; Bearskin does a very good job. There are many small carriers and they will fill the marketplace.
I continue to say to Air Canada, ``Why do you not do this? You would save a lot of aggravation, I do not think you would be hurt and you would help to foster the critical mass for these smaller companies.''
Senator Di Nino: Minister, you started your comments by saying that Canadians rely heavily on air transport because ours is such a vast country.
You also reminded us that two things they are looking for are safety and price. I would add ``reasonable convenience.'' Obviously, if you cannot get somewhere at a convenient time, you may not wish to go.
Minister, our citizens are looking to us to find some possible solutions to the problems that we agree we have in this country in the area of aviation.
One topic that has been raised from time to time is cabotage. Could you share the current government's position on cabotage?
Mr. Collenette: Foreign carrier point-to-point service within Canada has been the subject of many an editorial in the newspapers. Mr. Milton wants us to pursue it with the Americans. I wrote to Mr. Mineta, the U.S. Secretary of Transportation. I have raised this subject three times. I spoke to him after Mr. Milton sent his letter. This subject is somewhat academic.
The advice I have received from Mr. Mineta is that the U.S. Congress would not be interested in cabotage with Canada for two reasons. First, U.S. carriers believe Air Canada to be a high quality, low-cost carrier — the latter because of the dollar differential.
If one speaks to American friends, especially business people, one will learn that once they have travelled on Air Canada from New York to Toronto or Montreal or other cities, they will prefer to use Air Canada rather than U.S. carriers. It provides better service, quality and food. However, because of the dollar and the cost structure, Air Canada is seen as a low-cost operation when flying into the U.S. It has 60 per cent of the transborder market as it is.
Second, Cathay, Air France, BA and other carriers would all want these same cabotage rights. I do not believe the U.S. Congress would ever agree to cabotage. The unions and the U.S. carriers would oppose it. I have not seen one statement by the head of any of the U.S. carriers endorsing this. From time to time, I speak to Don Carty, a Canadian who runs American Airlines. He has never raised the subject of cabotage with me.
Let us assume that we had reciprocal cabotage; it cannot be a one-way agreement, because otherwise we would get creamed. The American carriers would just send in planes to the Toronto-Vancouver and Toronto-Calgary markets, the two best in the country. They will siphon off all the traffic and that will not help Air Canada.
Right now, Air Canada has 90 per cent of the Toronto-Vancouver market. That is too much for my liking, but that will change over the summer, with SkyJet and Air Transat, and with WestJet coming in at the end of May. They will feed into the western network, including Vancouver through Calgary.
That means that if U.S. carriers come in, they will siphon off that market where they can make the money. They will undercut Air Canada, whose lucrative market will be weakened. This is a company that lost $1.5 billion last year and is $11 billion in debt. We do not want to weaken it further. We have this giant in this country, but it is a very fragile giant. We must be careful.
Also, the American carriers will not serve markets such as Sault Ste. Marie, Moose Jaw or Chicoutimi.
Senator Di Nino: I am somewhat confused. You started by saying the U.S. carriers would never accept cabotage. Now you are talking about if they did. Air Canada has told this committee that they would welcome reciprocal cabotage. If would have to be reciprocal, obviously. I agree with you totally, it cannot just be one way. You confused me somewhat there.
From your discussions, assuming you have had several with the Americans, you seem to indicate that there was absolutely no interest on their part in engaging in cabotage with Air Canada.
Mr. Collenette: Far be it for me to disagree with the management of Air Canada. They know the airline business better than I do. All I know is that American Airlines has 1,000 planes; Air Canada has 340 planes. The Americans will put on a capacity load in the lucrative markets and pin Air Canada down. Air Canada will not have a chance to obtain increased equipment to serve the U.S. market. Mr. Milton may disagree with me, but in any event it is academic because the Americans are not interested.
Senator Di Nino: This is where my confusion came from, minister.
If Air Canada wanted cabotage, would you help them to get it? That is really what we are asking. Would you provide that competition?
Mr. Collenette: I raised this subject twice with the Democrats and three times with the incumbent in Washington. My deputy has engaged her counterpart, Mr. Jackson. An anonymous official in the state department may say, ``Oh, yes, we would agree.'' I am sorry, but the people who count tell us that the U.S. Congress would not be interested in this.
The Americans are interested in expanding the Open Skies Treaty we signed five or six years ago. Their shopping list is the same as it was then: co-terminalization of cargo, enhanced code-share rights, all that kind of stuff. We are prepared to sit down with them and negotiate. However, cabotage is not on their list.
Senator Di Nino: Has there been any discussion on this subject with other foreign carriers such as BA, Air France or others who travel from Asia to Vancouver to Toronto, or from London to Toronto to Vancouver, et cetera?
Mr. Collenette: Where would the reciprocal benefit be?
Senator Di Nino: That is something for Air Canada.
Mr. Collenette: If cabotage was negotiated on an EU basis, there might be a good chance. The European Commission has served notice on its member states that they believe the commission should be negotiating community-wide, global agreements with other countries, rather than on a bilateral basis.
We have agreements with France, Germany and the U.K. on that. If that is the case, maybe one could say there could be reciprocal cabotage with the EU, which would certainly benefit Air Canada, and Air Transat to a lesser extent.
However, the U.K. is our biggest foreign market. What is the advantage for Air Canada? It will not run planes from Heathrow to Glasgow or Manchester. British Airways is getting creamed by Ryan Air and easyJet. What is in it for them?
British Airways would send over 747-400s with 420 seats that they run on the Heathrow-London route in the summer. They would run two or three of them through Vancouver like a vacuum cleaner, sucking up all the traffic at low prices, and then turn the plane back to London and do it in reverse. Then where is Air Canada or WestJet?
Senator Di Nino: With all due respect, minister, you and I are not running Air Canada. However, the Air Canada representatives were very firm in their statement that with reciprocity, they would be delighted to look at this. That is for them to decide, not us.
Mr. Collenette: If the Americans want to talk about that, we will talk. We are not closing the door. However, this is fool's gold that everyone latches on to. When you really explore it, it is not the solution.
We will do anything to try to enhance competition. I said to Mr. Milton that I would raise it with Norm Mineta and I did. The reply I got was not encouraging.
Let us get off that wicket and try to do things that will help.
Senator Fitzpatrick: We have been focusing on 104.1 and 103. You have indicated that Bill C-26 was introduced for transition purposes, and presumably, Bill C-23 is an extension of that.
It is fair to say that there is a concern in Canada about the shortcomings of airline service. There is a concern about the dominance of one airline. What consideration is being given to a review of airline policy, perhaps looking at regulations that might assist in providing additional competition in the market?
I do not want to put you on the spot, but I wonder if you can help us in that regard. Is any consideration being given to dealing with some of these questions, whether it is cabotage or the six freedoms?
Mr. Collenette: Many experts have given me advice. We just spoke about cabotage and I do not think that is the answer. However, let us assume that the Americans were in agreement. What would be the effect? I think it would be very harmful to the Canadian domestic industry.
There is the argument for having open skies. I think in the long run, we probably would not have an Air Canada. Some people do not care, but I do. It is not a 1970s Canadian nationalist view. I believe that we are a unique country with unique institutions and values, and we want to remain independent. We want industries that ensure the good jobs remain at home.
Honourable senators may remember that when American Airlines had 33 per cent equity and 25 per cent voting control, as permitted by the CTA, in Canadian Airlines, many of the key back-end jobs were in Dallas. Do we want to have only the front-end service jobs? No, I think governments have an obligation to try to maintain a creative environment so that we can keep the leading-edge jobs, the reservations, computer and maintenance jobs, in Canada. That is one issue.
The modified six freedoms is a variant of cabotage. It allows you to pick up point-to-point service through a U.S. hub, or in reverse, through a Canadian hub. I always thought that would not be a bad thing. I raised that with Norm Mineta as well. That did not seem to be favoured for the same reasons as full cabotage.
However, even if it came about, you would have quite a job convincing people to accept the inconvenience of going through customs twice. I am not sure that that is the answer.
Some experts raise the idea of a Canada-only carrier of a foreign competitor, much like Virgin Blue in Australia, which would fly according to Canadian law. The employees are paid in Canadian dollars; the airline follows Canadian rules, and so on. The issue is if that is allowed, then the 25 per cent foreign ownership for Air Canada must be waived.
We have just changed the famous 10 per cent that became 15 per cent single shareholder in Bill C-14. That was a subject of dispute when ONEX came on the scene. It is theoretical. If we allow a counterpart to Virgin Blue in Canada, now that we have changed the law, we could, in effect, have a foreign interest, for example, a U.S. carrier, own Air Canada.
You say, well, there is protection in the Air Canada Public Participation Act because the headquarters must be in Montreal. It even specified that the maintenance centre must be in Montreal, Winnipeg, Toronto or wherever. However, the rest of the key jobs will go. Head office in Montreal will be much like the banks' head offices when they fled to Toronto in 1976. That is not really the answer.
What else do we have? One option is to re-regulate the industry, to turn the clock back to the 1980s and the 1970s and have the CTA regulate capacity and prices. Do we want to do that? Since deregulation, air travel has grown exponentially. Fares have gone down. Fares in 2001 were 10 per cent lower than in 2000. That is not the case if you live on the Îles-de-la-Madeleine and in other small communities, where there is a real problem. However, most Canadians are within driving distance of a competitive system.
We could deregulate. I talked about that and all the pundits came down on me. That is an option to which most people do not wish to return.
The other is to ensure competition. The Competition Act is there to encourage competition, and let us ensure that these airline-specific amendments work. The commissioner is saying he did not get it right two years ago. He wants us to repair that.
Then the issue becomes, should it be for a certain period. Should we have some kind of review? I am hopeful that in a few years, we will have market stabilization. I would hope that Air Canada's domestic share would go down to 55 or 60 per cent, and then we would have viable options in most city pairs and help many of the smaller carriers. Maybe Air Canada would sell the regionals. Mr. Milton has hinted at that in the press. Then we would not need this clause. However, right now we do.
Senator Fitzpatrick: You touched on something that is a puzzle to me, and that is the question of ownership — not the percentage ownership of one shareholder, but foreign ownership. If we want an airline industry or airline in Canada that will compete with the other international airlines, how can that be achieved when we cannot compete worldwide for equity, for financing of the airline?
It seems to me that that policy or requirement really restricts the ability of Air Canada, or another airline that wants to start up, to grow and compete with other major airlines. Would you care to comment on that?
Mr. Collenette: Air Canada is a business that can raise money anywhere it wants, and it has. In fact, foreign bondholders hold much of its debt. They can raise money anywhere, and the question is whether they need the equity.
Even if you raised it 100 per cent, I do not think that would be the answer for Air Canada with the current balance sheet and debt problems. I really do not think that is the answer. However, if you did that, you would ultimately lose control of Air Canada or WestJet or any other, similar airline.
Many countries, including the U.S., keep that 25 per cent limit. The Americans, who are our biggest competitors, do not want to lose control over their own airline industry. They are pretty shrewd, and if it is good enough for them, then it is good enough for me, or for us, the government, the royal ``we.''
Senator Meighen: There is not much left to do except cross a few t's and dot some i's, and I would like to ask you about that.
In respect of proposed section 104, if the commissioner issued an interim order and subsequently the tribunal found there was no basis for it, would there be any recourse for the dominant carrier in terms of damages to reputation or to revenues?
Mr. Collenette: No, but I can tell you that the tribunal would think twice about granting powers to the commissioner on a subsequent occasion.
In other words, if it were used in a frivolous manner, as I said before, then the tribunal would be very tough on the commissioner. However, no, there is no recourse.
The Chairman: There is also no recourse for the government.
Mr. Collenette: That is correct.
Senator Meighen: It is part and parcel of some of the concerns, as you can well appreciate. The commissioner is both judge and jury, and if he is wrong, the only sanction is that the tribunal would be more careful the next time.
Mr. Collenette: Senator, I am told that section 103 applies to other industries in the same way. There is no way to sue for damages. We should not only finger this particular cease and desist power of the commissioner.
Senator Meighen: Perhaps we should not, but the consequences in an industry that is, by your own admission and certainly by my observation, fairly shaky, could be quite draconian. However, let us leave that. You have answered my question. Thank you.
This confuses me. Am I right that your eventual ideal scenario would be strong regional airlines feeding into a strong national-international carrier?
Mr. Collenette: Do you mean for Air Canada?
Senator Meighen: I mean for Canada. That strong, national and international carrier could be Air Canada, or perhaps WestJet. However, you referred often to the Îles-de-la-Madeleine and to Moose Jaw, whom someone has to service. I understand that a large international carrier such as Air Canada does not make money doing that.
Mr. Collenette: That is why they are looking at those markets. As of January 4, they will be in a legal position under Bill C-26 to give notice to terminate service in small communities.
Senator Meighen: Right, however, some of the larger communities that are still — and I do not want to insult anyone — outlying, act as feeder points for a national or international carrier. Is that not correct?
Mr. Collenette: Yes, that is correct.
Senator Meighen: Obviously, they have an interest. Do you see Air Canada, for example, remaining in a regional market with other companies?
Mr. Collenette: I alluded to that earlier. I do not see why Air Canada must offer service to Chicoutimi or Sault Ste. Marie or any of these smaller communities simply for the sake of an international feed.
Senator Meighen: Air Chicoutimi will not fly to London.
Mr. Collenette: There are interlining arrangements. One of the raps against the merger from British Airways — and I met with Mr. Rod Eddington, their chief executive, about this last year — is that they allege that Air Canada is charging exorbitant interline fees to connect with the A-flights. I told them to speak to this at the bureau, but they did not want to do that for some reason. Then I said, ``Well, do not complain to us.''
The fact is that outfits like Bearskin, which interlines with Air Canada or American Airlines, should serve the small communities.
I happen to believe that 6 times out of 10 on transborder routes, and more on transoceanic ones, Canadians will fly with Air Canada. I do not understand why they have to maintain that presence, but they claim to need the feed. I do not believe it. They needed it when they and Canadian were knocking heads. However, why not just serve the major markets and have independent regionals interlining?
Senator Meighen: Perhaps if Mr. Milton is hinting at the sale of the regionals, as you alluded to earlier, he may be coming around to your way of thinking.
Mr. Collenette: When I said, ``hinted,'' I should have said that he stated this publicly.
Senator Meighen: You said it was in the newspapers.
How would you respond to someone who believes that if this bill is passed, the Competition Commissioner will become the sole judge of competition and the allocator of market share?
Earlier, minister, you said that you rather liked 50 or 55 per cent as Air Canada's eventual share of the market. Who is to say that the commissioner will share that view? I realize that he is not legally charged with being a market allocator; however, would you not agree that that could effectively be the case? The commissioner might think that 55 per cent is not enough, or too much.
Mr. Collenette: Senator, he would be exceeding his powers if he took action simply because he had a notion of what the best market share should be.
His only recourse for using this power is to look at the evidence on a prima facie basis to determine that there is predatory behaviour, and that there is evidence that a dominant carrier is either applying capacity or manipulating price below cost to undermine the competition.
If the commissioner were to try to become the ``market allocator,'' as you have described it, the tribunal would throw it out. I would say that his credibility would be damaged.
Senator Meighen: I hope you are right. The powers that you are giving the commissioner could be used, consciously or unconsciously, to make him into a market allocator. However, you may be right that the judicial constraint will be such that that will not happen.
Are you concerned at all that competition at the regional level would be restricted by this proposed legislation? If Air Canada were no longer in that market and it were now only ABC airlines, they would not necessarily charge less than what is being charged now.
Mr. Collenette: That is always the danger. However, there is a better chance for competition with smaller entities in smaller markets than with the Air Canada regional family and a small operator, such as Eastern Provincial Airways, versus Air Nova.
We have good competition in the North. Not only do we have First Air and Air North, but also many smaller carriers, some of which have a handful of planes, to provide competitive service.
Frankly, the big problems with competition occurred in areas of Ontario, Quebec and the Atlantic. There is competition in the West.
I do not know what Air Canada's market share is for the western routes, but I suspect they are fairly even with WestJet overall. On specific city pairs, they are probably in the weaker position.
You made the point that if they pulled out, Bearskin would hose the market, but someone else will just step in and offer a more competitive product and we will have all these small carriers.
Senator Meighen: How many carriers do we have?
Mr. Collenette: There are 600 to 800 carriers.
Senator Meighen: It would not be Air Canada, would it? The commissioner would prohibit them from doing it.
Mr. Collenette: No, no.
Senator Meighen: He would take the position that there was predatory pricing if Air Canada started to move back in.
Mr. Collenette: Not necessarily. Air Canada's problem on all these smaller routes is that they have well-paid, unionized employees, a high cost structure and big planes. If they pull out of some of these small markets, someone will go in with a Beechcraft, a 19 seater or other equipment. They may be non-union and have a lower cost structure, and they will offer lower fares.
Senator Meighen: Do you have to negotiate over the slots that are owned by airlines in order to open up the market?
Mr. Collenette: Airlines do not own slots in this country; they are allocated under the authority of the Minister of Transport in the Aeronautics Act. We are enhancing that authority in Bill C-42. Slots are only a problem at Pearson, where the slot allocator is funded by all the airlines, including foreign carriers. A consultant out of Calgary allocates slots, and there is never any problem.
Senator Meighen: There is no problem at Toronto City Centre?
Mr. Collenette: There is definitely no problem at Toronto City Centre, and no problem at Pearson, even for peak slots. We do not really have a slot problem in the country, unlike the New Yorks and the Heathrows of this world.
Senator Oliver: Minister, in your paper, I was surprised that you chose to say that we have an industry, or company or airline-specific policy in this bill and there are other countries that do that. You said in your paper that the power is not unique to Canada; they have it in the European Union.
Are you aware that in Australia, where they experienced the failure of an airline, the head of their Competition Bureau, Professor Fells, has criticized Canada's approach and said he would not follow anything like it?
Mr. Collenette: I am not aware of that specifically, but frankly, the Australian market is not a paragon of virtue.
You cannot compare the Australian market with the Canadian market. Australia does not sit next door to the wealthiest country on earth, with literally thousands of planes. It is not a comparable situation.
Senator Oliver: Professor Fells said it is poor public policy to try to regulate an airline industry through framework legislation.
Mr. Collenette: If you accept that, what you are really saying to the government is, ``We want you to regulate the industry.''
Senator Oliver: No. We would like you to develop a vision for airline policy in Canada and come up with new legislation to deal with that and let competition policy be competition policy.
Mr. Collenette: Senator, we did that in Bill C-26. It passed unanimously in the House of Commons. There were no divisions amongst the five parties. It was passed unanimously in the Senate. There was the appendix that I read to you, which actually reinforced our concerns on Bill C-26.
I get a little concerned when it is said that we do not have an airline policy. The undertakings the commissioner negotiated with Air Canada, as entrenched in Bill C-26, the amendments to the CTA on prices on monopoly routes and the predatory behaviour clauses all constitute government policy. If you throw this approach out in trying to have competition as adjudicated by the Competition Act, then you will have one potentially dominant carrier in the country and that will ultimately affect price. The only way to get around that is to re-regulate Air Canada.
Can we force Air Canada to break up? I am not sure the shareholders would be happy. We can re-regulate them, but there will be much fuss and many court challenges in doing that. What else can we do?
I receive a lot of criticism, as did the government, and I do not care. I am paid to do that. However, if people do not like the government's policy as endorsed by the House and the Senate in Bill C-26, tell us what else we can do. We have explored some of these things today.
Senator Oliver: Debra Ward's report, ``The Impact of Airline Restructuring in Canada: Third Interim Report,'' has gone through all the options you discussed, such as should we re-regulate. She is not able to come up with any of the answers and suggests that what we need is a new look, a new vision and a new policy. What would you recommend?
Mr. Collenette: What does that mean, ``a new vision''? It is great to say that.
The Chairman: You referred to Air Canada as a ``fragile giant.'' Obviously, it is. Do you have any concerns that the stress that may be put on them by this bill or the government's viewpoints could topple them? If they did collapse, it would seem to me that would lead to major chaos. Do we not need to tread carefully here?
Mr. Collenette: I think Air Canada's challenge, and Mr. Milton is meeting it in many respects, is to reorganize the airline, cut costs, reduce capacity and achieve higher seat utilization. All of these things will make the company more competitive.
After September 11, he was asking for a $4 billion bailout, but recently he has said the carrier may break even this year. It is a combination of the market recovering and the fact that Air Canada is getting its own costs under control. If that continues, then I assume they can deal with their horrendous debt problems.
Air Canada, as an airline, will always be there. There may be financial pressures that force a restructuring at some point. I am not sure we are there, and I am not saying we will reach that point. Air Canada is too big not to survive in some form. Is it too big to fail? No. That is the challenge that management are working towards right now in reducing their costs and trying to come to new arrangements with their workers, the same as in any business.
I do not think Canadians should worry about Air Canada not being there. It will be there in some shape or form, and I would say a significant form. The government wants to ensure that Air Canada has some competition. They have it in the western half of the country and some selected markets in the East. There is another part of the country where we need competition and that is why we are back with these amendments.
The Chairman: Thank you for your appearance. It has been illuminating.
The committee adjourned.