Proceedings of the Standing Senate Committee on
Transport and Communications
Issue No. 4 - Evidence, June 21, 2016
OTTAWA, Tuesday, June 21, 2016
The Standing Senate Committee on Transport and Communications, to which was referred Bill C-10, An Act to amend the Air Canada Public Participation Act and to provide for certain other measures, met this day at 9 a.m. to give consideration to the bill.
Senator Michael L. MacDonald (Deputy Chair) in the chair.
[English]
The Deputy Chair: Today, the committee is continuing its examination of Bill C-10, An Act to amend the Air Canada Public Participation Act and to provide for certain other measures. This bill would modify the existing requirements governing where Air Canada must carry out its aircraft maintenance activities, as well as the type and volume of those activities. The bill also provides for certain other measures related to this obligation.
Let me provide an outline of today's meeting. During our first hour, the committee will hear from the Fédération des travailleurs et travailleuses du Québec. During the second hour, we shall hear from Air Canada officials. Then, the committee will begin clause-by-clause consideration.
Let me introduce our first witnesses. From the Fédération des travailleurs et travailleuses du Québec, Serge Cadieux, General Secretary; and David Chartrand, Vice President.
I understand that Mr. Cadieux is making the presentation, and Mr. Chartrand is available to assist with any questions. Mr. Cadieux, would you begin, please?
[Translation]
Serge Cadieux, General Secretary, Fédération des travailleurs et travailleuses du Québec: Thank you, Mr. Chair. The FTQ wishes to thank the Senate committee members for this invitation to discuss Bill C-10.
The FTQ is a central labour body representing 600,000 members from 5,000 local branches of Quebec, national and international trade unions. More than 20,000 aerospace workers are members of the FTQ; they work in the manufacturing and maintenance of aircraft and their components, and act as flight attendants, pilots or airport personnel.
Your decision concerning Air Canada will be, in our opinion, ill-advised if it does not take into account the industrial ecosystem in which this company operates. Our tendency to consider the issues separately, as we are moved to do with this bill, is a trap that, in this case, would prevent us from seeing the forest for the trees. So, I will take advantage of the few minutes that you grant us to share information that strikes us as being critical.
The maintenance, repair and overhaul sector, referred to as MRO, represents 30,000 direct jobs and 26 per cent of the Canadian aerospace industry's direct GDP in 2014. The remaining 74 per cent comes from the manufacturing sector, more than half of which is located in Quebec.
This information is important, insofar as all major aerospace clusters in the world have a well-developed aircraft maintenance industry, since the knowledge of the employees in this sector is a necessary and essential part of the production cycle. This expertise opens access to in-depth knowledge of the sector and to product engineering to improve the different components of the aircraft.
Globally, the MRO services sector occupies a much larger place in the aerospace industry than what we see in Canada. The global MRO services market represents 75 per cent of the aircraft and helicopter production value. In Canada, this proportion is only about 36 per cent. There is food for thought here. In fact, we believe it is essential to improve this ratio if we want to continue to develop the aerospace industry on our territory. However, Bill C-10 will produce the opposite effect.
To simply illustrate what I have just said, I invite you to think about the Héroux-Devtek company, for example. The company began its activities in the 1980s, precisely in the MRO services sector. And it is exactly the acquired knowledge in the repair and maintenance of landing gears that allowed them to become the important world-renowned manufacturer that they are today.
I emphasize the fact that the decision concerning the maintenance performed on the Air Canada equipment does not only concern this company. This decision, which is in your hands, will have an impact on the aerospace sector as a whole. So, if you let Air Canada operate in isolation, it is clear that this company will continue to reduce its demand for Canadian maintenance services.
They will argue that it is normal to allow Air Canada to enjoy the same flexibility as its competitors. But the aircraft maintenance industry is an advanced sector that we feel it would be ill-advised to treat as if it were a low priority non- strategic sector. In other words, it is justified for Canada to want Air Canada to remain a Canadian-owned company. And it would also be justified for Canada to want the maintenance of its aircraft to be carried out on its territory in order to stimulate a local aerospace industry. It would make a lot of sense, in any case, to do so knowing that the prospects for global growth in the maintenance sector are favourable.
According to the information that we obtained, over the next 10 years, the demand for MRO services should grow from US$64 billion to US$96 billion — an increase of 49 per cent. The market will be driven, among others, by a global air traffic that doubles every 15 years and will drive a significant increase of the aircraft fleet. In 2015, North America accounted for 29 per cent of the demand for MRO services.
Honourable senators, at some point, public authorities must make the decisions the private sector cannot make. We are all well aware here that the invisible hand of Adam Smith is an illusion. There is no invisible hand; there are only laws, regulations and fiercely negotiated international trade agreements.
Therefore, the first pitfall to avoid in the debate surrounding Bill C-10 is imagining that we are facing a lack of choice because it would supposedly be unfair to require Air Canada to perform its maintenance on our territory, while its competitors do not have this constraint. This is an area in which there are no international agreements to restrain your role as legislators and in which the Canadian economy has everything to gain. Why not keep these jobs in our country, and why not create the conditions for Canada to stimulate its aerospace industry?
From our point of view, Bill C-10 would not result in freeing Air Canada from the fetters to which it has been tied for 30 years, to quote words that were heard in this chamber. Its effect — and that is the real choice this committee is facing — is to allow Air Canada's executives to maximise the shareholders' performance at the expense of skilled jobs on Canadian territory. Yes, this is the real issue behind Bill C-10. Do you want to promote Air Canada's shareholders or rather employment and the development of the entire Canadian aerospace industry cluster?
This is a very pragmatic economic policy decision. Allow me, one last time before I conclude, to submit some data that must be taken into account. According to analysts, 1,000 direct jobs in the MRO services generate 1,457 indirect and spinoff jobs in the rest of the Canadian economy. This information is crucial.
In comparison, 1,000 direct jobs in the aerospace manufacturing sector generate 1,340 indirect and spinoff jobs. This is a difference of almost 9 per cent. The gap is even more significant — 14 per cent — in the case of the impact on GDP. This shortfall is simply explained by the fact that the MRO services use more local subcontractors than the manufacturing sector, which uses more components imported from abroad.
In short, it seems clear that the best decision from an economic point of view would be to amend Bill C-10. Let's be clear; from an economic point of view does not mean from the point of view of Air Canada's shareholders.
I do not have to tell you, honourable senators, who just amended Bill C-14 on physician-assisted dying, that there are no perfect decisions. There are no ideal economic policies; there are only those that are possible. In the less than ideal circumstances in which we operate, requiring Air Canada to continue to contribute directly to the Canadian MRO services industry is the best decision, from an economic point of view, for Canada.
That is why, in conclusion, we propose that the Senate amend Bill C-10. First, in order to stop the hemorrhaging of jobs in the maintenance services sector. In other words, by ensuring that the final text will not allow Air Canada to continue to reduce the amount of maintenance that they perform in Canada. Subsequently, in order to force Air Canada to bring its offshore maintenance activities back to Canada. Clearly, this means that, as a first step, Air Canada would maintain its 2,500 current jobs in Canada. Then, in a second phase, the company would gradually repatriate its offshore activities.
Thank you for your attention.
[English]
Senator Doyle: Thank you for your presentation. I have a couple of general questions.
If Air Canada is permitted to have the same flexibility as its competitors in moving or eliminating its aircraft maintenance in Manitoba, Quebec and Ontario, do you have any fear, as your presentation seems to indicate on page 3, that we run the risk of Air Canada not remaining a Canadian company? As you said on page 3, you want Air Canada remain a Canadian-owned company. What is the implication in that?
[Translation]
Mr. Cadieux: The Air Canada Public Participation Act stipulated in 1988 that Air Canada shall remain a Canadian company and continue to hire Canadian workers for the maintenance, repair and overhaul of its aircraft fleet. Under that act, Air Canada had an obligation to maintain its fleet in Winnipeg, Montreal and Mississauga. Despite the provisions of the act, Air Canada authorized the outsourcing of 2,600 jobs after Aveos closed. Those jobs were not outsourced to China, but to the United States and Israel, where working conditions are not inferior to ours. So Air Canada went before the courts, and we were forced to go before the courts to enforce the law. After two favourable decisions — one decision of the Superior Court and one of the Court of Appeal — a unanimous ruling rendered exceptionally by five judges in Quebec concluded that Air Canada was breaching the act. Afterwards, Air Canada applied for leave to appeal before the Supreme Court. In conjunction with the Attorney General of Quebec, Air Canada concluded an agreement to suspend deliberations, thus avoiding having to comply with the legislation.
I am personally convinced that, should Bill C-10 be passed as is — since it imposes no level of maintenance on Air Canada's air fleet — the corporation could hire three individuals in three different provinces to check tire pressure, and that would meet the requirements of the law. So, 2,500 other jobs in Canada are at stake. I am referring to direct jobs, and we know that 1,000 direct jobs related to the maintenance of Air Canada's fleet provide Canadians and the economy with about 1,500 additional indirect and spinoff jobs.
We have to look at Air Canada's past. I am sorry, but Air Canada has behaved like an offender with regard to Canadian laws. That is the case in terms of its obligation to maintain its fleet. That is also the case in terms of official languages. The fact that Air Canada is violating the Official Languages Act is not new. Before a House of Commons committee, the corporation's president said that he wished the act was repealed entirely. It is the act that stipulates that Air Canada shall remain a Canadian company. If the act is repealed, I am sure that Air Canada will not remain a Canadian company.
[English]
Senator Doyle: If the bill is passed, what, in your opinion, would constitute compliance with the act? You just told us what non-compliance would be. What would be compliance with the act for Air Canada in terms of the numbers of people that they should employ in Ontario, Quebec and Manitoba? Should there be 20 per cent, 30, 40 or 50? Because it's not really spelled out in the act what compliance with the act would be. In your opinion, what should it be?
[Translation]
Mr. Cadieux: Under the current act, Air Canada has the latitude to decide what percentage of activities or type of maintenance must be carried out on its fleet. When Air Canada hires a worker to check an aircraft's tire pressure, it is meeting the requirements set out in the act if that work is carried out in Manitoba, Quebec or Ontario. Before the Superior Court and the Quebec Court of Appeal, the Air Canada lawyers claimed that, by outsourcing its jobs, it was not violating the act, as no percentage of maintenance had been required to maintain its fleet. So the courts interpreted the legislation. Obviously, Senator Doyle, Quebec's highest court, the Quebec Court of Appeal, interpreted the application of the act. If Air Canada disagrees with the decision, it should appear before the Supreme Court, which will make a ruling on this matter. So the Supreme Court will determine what Air Canada's obligations are and whether the corporation has breached them. That is the answer I can give you.
[English]
Senator Doyle: Under a new act, would Air Canada be permitted to bring any foreign companies into Canada to participate in their aircraft maintenance? Would that be a possibility? Are you thinking about that?
[Translation]
Mr. Cadieux: Absolutely. It should be noted that, once the act was passed in 1988, Air Canada was not responsible for maintaining its fleet. It entrusted that task to the subcontractor Aveos, which is not the only such company in the world. Once Air Canada has an obligation to maintain its fleet here, it will find subcontractors. It is said that a centre of excellence will be created in exchange for the purchase of 40 Bombardier C Series aircraft. The maintenance of those aircraft will be done in Quebec and on Canadian territory, which is entirely possible. Currently, Air Canada has 2,500 employees involved in the repairs and overhauls of the Air Canada fleet. That has never been a problem since 1988, but it suddenly became one in 2012, as the company wanted to make the shareholders wealthier.
We have to see things as they are. In Quebec, in the greater Montreal area, 1 out of 47 jobs is dependent on the aerospace sector. That is not insignificant. There are specialized schools in Quebec whose students will be able to meet the obligations of airlines and manufacturers. An entire ecosystem has been put in place. If the Canadian national airline is allowed to carry out its maintenance and repair activities abroad, that affects the subcontractors and an entire education system set up to support the aerospace industry in Canada.
That clearly also weakens our economy. Frankly, Air Canada is asking for amendments to the legislation at a time when its financial health is excellent. When that is the case, it does not hesitate to come knocking on unions' doors and ask them to renegotiate collective agreements. Who made sacrifices in the latest Air Canada restructurations? All Canadians did, as the corporation received subsidies from the Canadian government. Our taxes paid for those subsidies. In addition, Air Canada asked the unions to renegotiate the collective agreements in order to insert double pay scales, making it possible to change the pension plan, and so on.
As soon as Air Canada is doing well financially, it forgets that and asks for permission not to bring back the 2,500 jobs that were created outside the country. Moreover, it is asking for permission to fire the remaining 2,500 employees. Quite frankly, I find that Air Canada has a lot of nerve. The airline is not an outstanding corporate citizen in Canada, to say the least.
Senator Pratte: I have two questions for you. Mr. Cadieux and Mr. Chartrand, the committee has received a brief from the Government of Quebec's minister of the economy, science and innovation, Ms. Anglade. The minister talks about the agreement concluded with Air Canada to create a centre of excellence. She says the following, and I quote:
The Government of Quebec has requested that Bill C-10 come into force as soon as possible, that is, by the end of the parliamentary session at the end of June 2016 and before the July deadline the Supreme Court of Canada gave for suspension of court proceedings.
So the Government of Quebec is asking the Senate committee and the Senate to pass Bill C-10 before we adjourn for the summer, saying that it is satisfied with the commitment received from Air Canada to create a centre of excellence. That is something the committee must take into account, as it was, after all, the Government of Quebec that brought the matter before the courts after Aveos was closed. What can you tell us about that?
Mr. Cadieux: The unfortunate thing is that it is a secret agreement, the details of which are unknown.
Senator Pratte: Are you talking about the agreement concluded between Air Canada and the Government of Quebec?
Mr. Cadieux: Exactly. We even appeared before the courts, as we had filed an injunction to enforce the Court of Appeal's decision and to try to get access to the agreement. Bombardier and Air Canada are not giving Canadians a gift by saying that the corporation will have its C Series aircraft maintained on Canadian territory. They cannot be maintained elsewhere, as they are not long-range aircraft. Maintenance on those aircraft cannot be done in Israel for a Canadian airline. That would be crazy.
The current act allows maintenance to be carried out in a centre of excellence that would not necessarily be operated by Air Canada or Bombardier. Nothing guarantees that the agreement concluded between Air Canada, the Government of Quebec and Bombardier will ensure that Air Canada will be maintaining that fleet at the centre of excellence. The current act does not require Air Canada to create a centre of excellence. It also does not require Bombardier to create such a centre. It does require the airline to ensure that its aircraft are maintained on Canadian territory.
The problem is that Air Canada has that obligation, but it can choose any manufacturer. Why would that aspect be limited to Bombardier? The legislation currently requires Air Canada to have its fleet maintained and overhauled, whether we are talking about Embraer, Boeing, Airbus, Bombardier or other aircraft. That is what we are asking for. We cannot put all of our eggs in one basket, since that has repercussions on Canada's aerospace cluster, on all our subcontractors and on the entire ecosystem.
Senator Pratte: You see our dilemma. The Government of Quebec, the main applicant in the case before the courts on which you are basing your arguments, took the matter all the way to the Court of Appeal. For the applicant, the agreement concluded with Air Canada is satisfactory to such an extent that it is withdrawing from the case and is even asking the Senate to pass Bill C-10.
Mr. Cadieux: The Government of Quebec is not saying that it is withdrawing. It cannot withdraw, as there is a decision. Air Canada can withdraw.
The role of a senator is not to deliver an order to a provincial government, with all due respect for the opposite view. You have to rise above the fray and see what Canada's interest is. What interest of the Canadian economy is fulfilled in this case? I have been negotiating collective agreements for 35 years, and I can tell you that I would not have hired the Government of Quebec's negotiator to manage this agreement.
Air Canada's president is a very skilled negotiator. He had two strikes against him, but he managed to bring the Government of Quebec into an agreement a first-year law student would have never gotten into. It is not an argument to say that you will give up and pass a bill without proposing amendments to it because the government of a province asked you to do so.
In the current legislation, it is clearly stipulated that a province cannot amend the act, as it is a Canadian statute that concerns a Canadian airline, a Crown corporation since 1937, and that conditions have been imposed on Air Canada in that sense. We have to be careful, as the reasons for which those conditions were imposed were not frivolous at the time, and they are still relevant today.
Of course, we have to take into account the state of the economy. We have tried to provide you with an overview of objectives based on reliable data on what the aerospace cluster means in Canada. The problem is twofold. The first aspect of the problem is the fact that Air Canada's violation of the act has had consequences. Jobs have been outsourced. The other aspect is that, if the act is amended as per Bill C-10, we have to understand that another 2,500 jobs will be lost. That much is clear.
Air Canada had no right to outsource those jobs, and yet, it did so. If it is given carte blanche, it will definitely move forward. You have to look at this issue from the perspective of Canadians' interests. You should not look at it only in the interest of a dispute among the Government of Quebec, Air Canada and Bombardier, but in the public interest.
Senator Pratte: I would like to raise a second point quickly. In your presentation, you talked about the interests of the entire aerospace sector in Quebec and in Canada. However, yesterday, the committee heard from the President of the Aerospace Industry Association of Canada, Jim Quick, who talked about the agreements that led to the creation of centres of excellence for maintenance in Manitoba and in Quebec. He talked about Bill C-10 as being in the interests of Canada's aerospace sector. Yet, you are saying that voting in favour of Bill C-10 would go against the interests of the aerospace sector. According to the spokesperson of Canada's aerospace industries, passing the bill would be in the interests of the aerospace sector. So who is right?
Mr. Cadieux: Senator, what in the current legislation prevents the creation of centres of excellence? Quite frankly, nothing prevents that. In addition, nothing was preventing Air Canada from entrusting a subcontractor with the maintenance and repair of its fleet. That is actually what Air Canada did with Aveos, but at some point, it decided to eliminate that subcontractor. Perhaps the business model no longer suited it.
Perhaps the business model can be developed through centres of excellence, as well. I am not saying it cannot. I am saying that the current legislation makes that possible. The issue is deciding to relieve Air Canada from any obligation, relying only on a centre of excellence for a fleet of 40 aircraft. I think that is slim, as Air Canada's fleet consists of 400 aircraft. We are talking about 40 or 45 aircraft limited to a single manufacturer.
Once the type of aircraft is changed, what will happen to the students and workers specializing in that sector? Currently, the beauty of our aerospace sector is in our highly specialized workforce that is capable of working with any manufacturer — be it Airbus, Boeing, Embraer or Bombardier. Workers have been trained for all types of aircraft, but this would kill that expertise. If the bill is passed as is and we limit ourselves to a centre of maintenance dedicated to a single type of aircraft, Canadians will lose out.
David Chartrand, Vice President, Fédération des travailleurs et travailleuses du Québec: It is important to note that the act, as currently worded, requires Air Canada, until further notice, to maintain its entire aircraft fleet here, from the aircraft's nose to its tail, from A to Z.
If Air Canada decides to buy C Series aircraft, that existing act forces Air Canada to ensure the maintenance of those C Series aircraft on Canadian territory, as well. That is already in the text of the act. They are promising a centre of excellence that will replace a provision that is already in the act and concerns jobs that should be in Canada, but have been outsourced.
There is no reason to say the act should be amended. In the current act, Air Canada has an obligation to maintain its entire aircraft fleet, including any new aircraft the corporation may buy. However, we are being told that the rest would be covered by a verbal agreement concerning a centre of excellence for maintaining a certain type of aircraft.
Our expertise is being watered down, and our school programs will suffer from it. The programs will be adapted to the work being done, so instead of providing certifications related to a number of aircraft, and instead of having general expertise, an incredible versatility Canada is known for, we will put all of our eggs in the same basket.
So, when the aircraft no longer works, what will happen? It will no longer be possible to maintain Boeings and Airbuses, or to attract other clients. The expertise will no longer be there. By doing this, we are shooting ourselves in the foot. The current act states that Air Canada must maintain all its aircraft, including new planes, be they Boeings, Airbuses or Bombardier aircraft. The company is supposed to do everything here.
[English]
Senator Unger: Thank you, gentlemen, for your presentation. I've been left with the distinct impression that there's a rush to get this bill through before the July 15 Supreme Court deadline. Would you agree with my comment? And what would be the reason for this big rush?
[Translation]
Mr. Cadieux: It's simple. I practised law for 20 years. I sometimes told my clients that they should reach an agreement because they wouldn't like the highest court's decision. That's what happened with Air Canada. It filed an application for leave to appeal. It wants to work quickly to find another way out. If the Supreme Court dismisses Air Canada's appeal, the company would be faced with the Court of Appeal's decision, a declaratory judgment. An injunction was filed, and the Superior Court would order Air Canada to comply with the act. Obviously, that's not what Air Canada wants.
The remarks made by Quebec's minister of the economy, whose government intervened before the courts, have been brought up as an argument. How much weight should they be given? It's worth remembering that, when the Quebec government intervened before the courts to enforce the act, it was not a Bombardier shareholder. The circumstances are no longer the same. In what capacity did the Quebec government sign an agreement? As a shareholder of the new Bombardier company, because it owns 49 per cent of the C Series aircraft? Or as an advocate for the public interest?
This confuses me, because the Quebec government is taking action in the case as both a company shareholder and the Government of Quebec. I think the Quebec government had the right idea when it decided to appeal to the courts, which enforce compliance with legislation in a democratic society. The courts must be left to do their job. Air Canada has always said that it wasn't bound by its obligations, and it is responsible for convincing the courts. The court decisions have been respected.
However, Air Canada has it easy. The decision against Air Canada requires it to repatriate a large part of the maintenance work. Under Bill C-10, Air Canada is not required to repatriate the jobs, but it can move them offshore if it wants to. That's completely abhorrent and unacceptable. The union representing the workers who made sacrifices was never consulted about the agreement between Bombardier and Air Canada. The union doesn't even know the details of the agreement between the Quebec government, Air Canada and Bombardier, yet it's the advocate for the 2,500 remaining workers and 2,500 former workers. Do you find it normal that one of the main players is not involved in the agreement? It's unusual in a country like Canada, where the fate of 5,000 workers was decided without consulting their representatives. It doesn't make any sense. In my view, the process shouldn't be rushed. I'm not sure whether the Supreme Court will dismiss the application for leave to appeal. Arguments will be made, and eventually Air Canada will need to make a decision on the merits.
If the committee proposes amendments to the bill, Air Canada may eventually find a somewhat more reasonable way to include the workers' representatives in the discussions. Until now, whenever Air Canada has encountered problems, it has resolved them with the union representing the employees. At the very least, we could sit down with the government and Air Canada to determine what would be better for Canada's economy, Canadian workers and the manufacturing sector. It's the only manufacturing sector that works in Canada. Of course, there's the automobile industry, but it received billions of dollars in assistance during the 2008 crisis, because it was considered important for the economy. The Quebec aerospace industry is as important as the Ontario automobile industry.
Mr. Chartrand: If you had read the transcripts of the meetings held in the House of Commons, you would know that, when the Air Canada representatives appeared, MP Luc Berthold asked them what would happen to the Bombardier order if the bill weren't passed. Obviously, the Air Canada representatives said they would need to review the case. That's another reason why they're trying to push things through quickly.
We are very concerned that, if the bill isn't passed, Air Canada will cancel airplane orders. That may happen, even if we don't want it to. It would be a major blow, because it is the best aircraft on the market. No aircraft is better or more cost-effective. It is the most technologically advanced, greenest and quietest aircraft. Delta has ordered it, and both JetBlue and British Airways plan to purchase it. The orders are starting to come in because there is no other comparable airplane on the market. Our expertise is extraordinary, and there is no better aircraft in this niche.
Air Canada could say that it was cancelling the order, because the order was not final. Air Canada is waiting to see what happens. I have trouble with the fact that we are living with a sword of Damocles hanging over our heads, and that a corporation is dictating to the country how things will proceed. That is another reason why we are intervening and trying to do so quickly. Air Canada has no reason not to purchase the aircraft. I think the company got a great deal. We don't know the details, but we know the company paid less than the current price, given that it was a client when the product was launched. Air Canada has also arranged for things to move very quickly, with the passage of a bill that will free the company from its commitments and obligations.
[English]
The Deputy Chair: Excuse me, I'm going to have to ask witnesses and senators to tighten up. Time is getting short.
Senator Unger: Okay, I'll be brief. If Bill C-10 passes before the Supreme Court's deadline, will this give Air Canada a free pass on their previous violations of moving jobs offshore?
[Translation]
Mr. Cadieux: Yes, absolutely. You are giving Air Canada the freedom to do what it wants, and that is what the company wants. I am taking the threat to cancel orders with a grain of salt. That's part of the rhetoric Air Canada uses to pressure members and senators. Honestly, I don't believe it, because Air Canada doesn't have any reason not to purchase the Bombardier products.
Senator Boisvenu: I want to welcome you to the meeting. I have a few questions, and I'd like you to keep your answers brief.
We understand that you are against Bill C-10, and that you have made your position known. We understand your point of view. How many Aveos workers are currently unemployed?
Mr. Cadieux: I can't answer your question. I know that 1,800 workers lost their jobs.
Senator Boisvenu: No, my question is clear. Do you know what percentage of Aveos workers are still unemployed?
Mr. Cadieux: We don't have the number.
Senator Boisvenu: How would Bill C-10's passage affect the one-billion-dollar class-action lawsuit filed by the workers against the Quebec government and Air Canada?
Mr. Cadieux: I have no idea. We didn't file the lawsuit. We filed an injunction.
Senator Boisvenu: Would the lawsuit no longer make sense if Bill C-10 were passed?
Mr. Cadieux: Maybe.
Senator Boisvenu: I know that, through my decision, I will aim to advocate as best as possible for Quebec's interests, which include the interests of the industry and workers. The entire industry, like the government, is in favour of Bill C- 10. However, it seems that the FTQ is not in favour of Bill C-10.
Do you advocate more for the workers' interests or the industry's interests?
Mr. Cadieux: Given what we presented to you today, with supporting data, we can say that we advocate for both the workers' interests and the industry's interests. You need to look at the facts. It's clear. The quotes are clear. These are not quotes from the FTQ's research service. When Air Canada withdrew 1,000 employees from fleet maintenance, 1,457 other jobs were lost.
Senator Boisvenu: I understand. Normally, Quebec makes agreements. Why was no agreement made between the industry and the union in this case?
Mr. Cadieux: Because we weren't invited to participate in the discussions. It's not complicated. It's what I explained to you earlier. I want to negotiate. I did it for 35 years. However, I need to be invited to the negotiation table. Everything happened behind closed doors. We filed a motion for an injunction even before Bill C-10 was introduced. We learned through the media that an agreement had been made in January between the Quebec government and Air Canada. We weren't invited, and still today, we don't know the details of the agreement even though we represent the employees. Honestly, it's quite an extraordinary situation.
[English]
Senator Black: Again, if we can continue in the spirit of short questions and short answers, I just want to confirm a couple of my notes, sir, to make sure that my notes are accurate.
We heard yesterday that Canada has the fifth-largest aerospace industry in the world. You would agree with that? Yes or no?
[Translation]
Mr. Cadieux: No, I believe it's the third.
[English]
Senator Black: You believe it's third? That's even more encouraging.
[Translation]
Mr. Chartrand: It's the fifth.
[English]
Senator Black: We heard yesterday fifth, so that's obviously a very important industry for Canada, which is good.
Could you please just confirm with me again the size of the MRO business in Canada?
Mr. Chartrand: We'd have to look for the statistics and all of that for the exact size. It's 26 per cent of the aerospace industry in Canada. Seventy-four is the manufacturing; 26 per cent is MRO.
Senator Black: What would the aerospace sector in Canada be?
Mr. Chartrand: In total, it would be 100 per cent. You've got 26 per cent that is MRO, and you've got 74 per cent that is manufacturing.
Senator Black: So is it a billion dollars, $2 billion, $3 billion? That's what I want to know.
Mr. Chartrand: We submitted the numbers.
Senator Black: Very well; that's great.
Mr. Chartrand: I don't know off the top of my head.
Senator Black: I can find that. Thank you very much. You did indicate the size of the global MRO business. You used a number 64 to 96, 49 per cent growth. Can you just confirm that for me, please?
Mr. Chartrand: Yes, we did.
Senator Black: And that's 64 million?
Mr. Chartrand: Billion, going up to 94. They're predicting the aerospace industry will go to $96 billion.
Senator Black: That is the aerospace industry, not the MRO?
Mr. Chartrand: MRO.
Senator Black: That's the MRO business?
Mr. Chartrand: MRO alone.
Mr. Cadieux: Yes, only MRO.
Senator Black: The MRO is 64, climbing to $100 billion. I've been provided statistics, facts — they are from Air Canada's financial statements — that indicate that, since 2012 to 2015, Air Canada's average MRO expenditure for those four years was $675 million. Any comment on that?
Mr. Chartrand: No, it's in the same financial statements as used before.
Senator Black: Correct. Therefore, Air Canada is spending roughly $675 million per year in an industry that you indicate is crowding in at $100 billion a year. Correct?
Mr. Chartrand: Yes.
Senator Black: Thanks very much for that. Would you share my view that Canada enjoys a world-class MRO business today?
Mr. Chartrand: We do.
Senator Black: Thank you.
Mr. Chartrand: We could do more, though.
Senator Black: Given all that, and these are your facts and facts that you confirmed with me, I have real difficulty accepting that our industry, which is fifth in the world, as you have told me, shouldn't flourish and grow regardless of Bill C-10. This is what I have trouble with. Help me, please. My question, then, would specifically be: Why do you feel you need protection when this is so clearly a successful, vibrant Canadian business? Why should we be protecting mature, vibrant success stories?
[Translation]
Mr. Cadieux: In the past, legislative protections were needed. Regardless, Air Canada managed to move 2,500 jobs offshore. Obviously, if Air Canada doesn't have any specific obligations, it will neither develop nor maintain its fleet based on the interests of Canadians. It will do so based only on the interests of shareholders.
[English]
Senator Black: You made that point, and I accept that point.
You have talked, sir, about the economic advantage to Canada, which we have just now explored a little. What's lost in all this is the economic advantage to consumers. Would you agree with me that if Air Canada is forced into any circumstance, or any Canadian company is forced into any circumstance, where their costs rise, then those costs will be passed to consumers and, therefore, consumers will be hurt? Are you not concerned about that?
Mr. Chartrand: I just want to say one thing. You should ask Air Canada representatives, when they're here, how much of the fraction of the ticket that you pay goes to maintenance — about 10 per cent. Most of the cost of that ticket is fuel, taxes from the airports and all other costs rolled in there. So it's a very minimal part of your plane ticket or your fare when you get on a plane — the maintenance of an aircraft. In that 10 per cent we include not just repair and overhaul but also cleaning the plane, the carpets on the inside and everything else. It's not that much of a part of the cost of the fare.
Senator Black: I would agree with that. I'm sure that's accurate. But you would agree with me that if costs rise for any business, those costs get passed to consumers.
Mr. Chartrand: I agree that those costs get passed to customers, but I think there are a lot of other places where they can save that will have less of an impact on our economy.
Senator Black: Thank you very much.
Senator Mercer: I don't want to get into a big argument. Everybody who knows me knows that I am not a defender of Air Canada. I have been very critical of the airline for a long time, but I do have a bit of difficulty with this bill. I understand why we had a bill in the beginning, when Air Canada was privatized, to protect jobs at the time as all kinds of changes happened. A number of people I have spoken to, not lobbyists but Canadians, have asked me why we are in this business at all of regulating this; or why, if we're going to regulate this, we are regulating only Air Canada; or why we aren't including WestJet and Porter. Those people are getting their planes repaired.
This is such a big industry, there are pretty well-paying jobs to do the maintenance on aircraft, and it would be great to be able to keep them all here; but it would be even better if we could create centres of excellence where airlines around the world say, "I'm going to get my plane fixed in Canada because they're good at what they do and the price is right." There are some opportunities here.
Why should we be regulating this in this day and age? Give me an answer to that question, not a history lesson because I know it.
[Translation]
Mr. Cadieux: Almost all industrialized countries have a national carrier and require that the aircraft be maintained within the country. That's normal. The conditions of Air Canada's competitors developed this way. You have to know the history of Air Canada, and the reasons why Canada agreed to disassociate itself from the public company and make it private.
However, are Air Canada's operating costs higher than those of comparable competitors? The answer is no. Air Canada operates under the same conditions as the rest of its competitors in Canada. Air Canada doesn't offer better pay to its employees than Air Transat or any other competitor in Canada. We want to keep jobs in Canada. We developed a manufacturing sector, schools and colleges to lure youth with the promise of many job opportunities in the aerospace sector. If all the maintenance jobs are moved offshore, the entire Canadian workforce will suffer. The entire sector in Canada will suffer.
[English]
Senator Mercer: We talked about having two centres of excellence, one in Quebec and one in Manitoba. I'd love to have one in Nova Scotia. However, let's just deal with what we have in front of us. It would seem that one emphasis we should focus on is the centres of excellence. If we build it, they will come. That's the old baseball term. If we build a centre of excellence and it is indeed a centre of excellence where we do the best work at the best price and deliver on time, it seems to me that the world would be our oyster. Many airlines out there would love to get things done on time at the agreed-upon price and by reliable maintenance people.
We've got nothing but quality people working in the industry, but delivery is the issue; and I'm not placing blame anywhere. Shouldn't we put more emphasis, or shouldn't everybody put more emphasis, on the opportunity that these centres of excellence present?
[Translation]
Mr. Cadieux: In my view, Bill C-10 does not provide for the creation of centres of excellence. You are depending only on Air Canada's good faith. I will say it again. Air Canada had to meet the conditions of the previous act in terms of official languages and fleet maintenance, which it failed to do. Under the current act, centres of excellence can be created. Bill C-10 does not contain a provision requiring Air Canada or any other carrier or manufacturer to create centres of excellence. You are relying only on statements without knowing the specific details of each agreement. The current act authorizes the creation of centres of excellence, and I am in favour of it. The act enables Air Canada to entrust fleet maintenance to centres of excellence. The text of the act doesn't need to be changed to create the centres of excellence.
[English]
Senator Mercer: I'm sorry; I guess I'm going to have to disagree. My understanding of business is that you look for an opportunity and a need, and you build around that. The need here is for centres of excellence to repair and provide maintenance of aircraft. If we build or support those centres and market them properly, then Air Canada would be a minor player in this. If we do it right, we could attract airlines from around the world and be number one in aircraft maintenance because our location is so perfect. We're close to the American and European markets and not that far from the Asian market. It seems to me that we've got quality people doing work in this sector, so we just need to create some way to increase this instead of putting the entire load on top of Air Canada, who I am not a defender of. I'm a huge critic. They can't find your luggage; they can't find a lot of things.
Anyway, I leave it at that, chair. I just think we're not focusing on the right thing.
Mr. Chartrand: I just wanted to add something to that.
The Deputy Chair: Go ahead, quickly.
Mr. Chartrand: Nobody here is saying that we don't believe there should be a centre of excellence. You're absolutely right. Everybody wants that centre of excellence. I think what's in doubt here is the fact that it isn't in that law. It isn't in the old act, and it's nowhere to be seen other than verbally, once again, without any commitments.
In Field of Dreams, if you build it, they will come. I'll tell you something: In this business you don't build a building without having any guaranteed contracts and work to put inside of it because it's an added cost that you can't guarantee you'll be able to make up. In this kind of industry, it doesn't work if you build it and hope they will come. I'll build it if you give me guaranteed contracts and you give me work to put inside of there to make sure I can pay for that building. That's the way it works in this industry.
Senator Plett: First of all, I apologize for being late. There were a few too many meetings this morning. But I do have a couple of comments and a few questions.
Although I certainly agree with and support Senator Mercer's entire line of questioning, I am a defender of Air Canada. I think that's a pretty good airline. They have lost my baggage occasionally and I have been allowed to buy some new shirts because of that, so they've treated me well. So I do support Air Canada. I think we have three — maybe a few more — great airlines in Canada, and certainly I fly Air Canada and WestJet and they serve me and my part of the country well.
But I am the critic of this bill. One of the reasons I'm the critic of this bill is because of the timing of it and because of what I believe it does for my province of Manitoba. But I want to ask a couple of very brief questions, and the answers can be brief as well.
My colleague Senator Black suggested we are forcing Air Canada to do something here with this legislation, and he was opposed to us doing so. The way I see it, if this bill doesn't pass, we're only asking Air Canada to continue doing what they have been asked, and legally obligated, to do for many years, and we're not actually forcing them to do anything other than upholding the law. Is that not correct?
[Translation]
Mr. Cadieux: We're asking Air Canada to comply with the act, which it failed to do. We have to look at two aspects of the situation. First, Air Canada employed about 5,000 people to maintain its fleet in Canada, and 2,600 of their jobs were moved offshore. Whether it's Air Canada or a subcontractor, we're talking about the requirements for fleet maintenance. So, it's a problem. The courts ruled on the issue and clearly stated that Air Canada violated the law.
The second aspect we need to look at is the remaining 2,500 fleet maintenance jobs at Air Canada. What will happen to them? Should we allow the company to continue moving the remaining 2,500 jobs offshore or stop the hemorrhaging?
[English]
Senator Plett: That leads me to the next question, when you talk about the 2,600 employees. It was asked last night, and I think Senator Black asked again this morning, where these 2,600 employees have gone. Mr. Chartrand, I believe you are the head of the machinists, and if you were representing those 2,600 employees, I find it a little disconcerting that you have no idea where they went.
Mr. Chartrand: As was stated yesterday, we don't have exact statistics on that. We know where a certain number went; they are the ones who stayed in contact. We're talking about four years ago. Four years ago, these members stopped being our members, many of them, except those who relocated within the aerospace industry to companies we represent. The others ended up in other jobs, some in school boards, some ended up in the cities, some ended up working for garbage companies and some ended up in other companies. They didn't keep in contact.
Senator Plett: I will ask Mr. Cadieux this question. I asked it of Mr. Chartrand last night and I will ask it of Air Canada. You are asking Air Canada to stop sending their airplanes to Duluth and Israel to maintain them. Air Canada is a company that needs to make money or they will go out of business, or they will ask us for more money, as they have done in the past.
They are doing this for a reason. I don't think they're doing it because they don't like you guys, so they must be saving money. I asked the question last night, and nobody knows how much money they're saving. Do you, Mr. Cadieux, have any idea how much money Air Canada is saving — and it's been said a few times — by illegally taking their airplanes to Duluth and having them maintained there?
[Translation]
Mr. Cadieux: The Quebec Court of Appeal was the one that said Air Canada acted illegally, not me. That's a fact. A decision was made by Quebec's highest court.
[English]
Senator Plett: Fair enough, but how much money are they saving?
[Translation]
Mr. Cadieux: I have no idea how much money they're saving. I can tell you that Canadian workers at Air Canada are not better paid than aerospace sector workers in the United States or Israel. So, I don't know where they save money when they proceed that way. Honestly, I don't know. I can't answer your question.
[English]
Senator Plett: They are not better paid than workers in the United States?
[Translation]
Mr. Cadieux: Not at all. Ask Air Canada this afternoon.
[English]
The Deputy Chair: We've come to the end of this part of the hearing. I'd like to thank Mr. Cadieux and Mr. Chartrand for participating this morning.
The committee will now hear from Air Canada. Let me introduce, from Air Canada, Kevin Howlett, Senior Vice President, Government Affairs and Regional Markets; David Rheault, Director, Government Affairs and Community Relations; and Fitti Lourenco, Director, Government Affairs, Federal Government and Ontario.
I understand Mr. Howlett will be making the presentation, and Mr. Rheault and Mr. Lourenco will be available to assist with questions. Mr. Howlett, would you please begin.
[Translation]
Kevin C. Howlett, Senior Vice-President, Government Affairs and Regional Markets, Air Canada: Good morning senators. I would like to start by thanking you for inviting us to participate in this important committee discussion concerning Bill C-10.
[English]
The bill before you seeks to modernize the maintenance part of the Air Canada Public Participation Act that was introduced in 1988. The original act introduced at that time had no sunset clause or similar provision for review that would allow the government or Air Canada to make quick and necessary changes to adapt to a dynamic and fast- evolving industry such as ours.
Today, we find ourselves in a position where we are constantly subject to litigation despite maintaining close to 2,400 maintenance jobs at Air Canada and supporting hundreds more across the country.
It is important to note that the previous government believed that Air Canada was living up to its obligations, and this was supported by the Justice Department.
Bill C-10 recognizes the transformations in our industry and the reality that Air Canada is a private sector company owned by private sector interests that operates in a highly competitive and global industry. In short, this bill helps to level the playing field for Air Canada against its competitors, none of whom face such restrictions.
Following the Aveos bankruptcy, we have sourced work with vendors in Canada, like Premier Aviation in Trois- Rivières, Avianor in Mirabel, Airbase in Montreal, and Hope Aero in Toronto, which will soon establish activities in Winnipeg as well. Our regional airline partners also generate extensive maintenance operations in Canada, and in particular in the provinces of Nova Scotia, Prince Edward Island and Quebec.
Before diving deeper into the bill, I would like to take this opportunity to briefly tell you about Air Canada today. Over the last six years, under the leadership of our president and CEO, Calin Rovinescu, we have undertaken to transform Air Canada into a global champion, and we are well on our way to doing that. We are not only a significant economic contributor to Canada but we also connect Canadians to the world and to other economies, allowing Canadians to explore new markets and exploit trade opportunities. We also connect the world to Canada. Last year, we flew more than 41.5 million passengers to more than 200 destinations across the globe, a 25 per cent increase since 2009.
Along with our regional partners, who employ 5,000 people, we serve more than 60 communities in this country. We employ 28,000 people of our own and support approximately 30,000 pensioners across the country. The salaries and benefits paid by Air Canada in Canada exceed $2.1 billion, and our total operational expenses in the country are close to $10 billion. Air Canada's impact on our GDP easily exceeds $20 billion, and we are growing.
It is also important to note that growth means new aircraft. Air Canada alone is undergoing a massive $9 billion fleet modernization program that will see our fleet become one of the youngest in the world. This does not include our $5.2 billion C Series purchase which could rise to more than $8 billion if we choose to exercise our additional 30 options. This is more good news because this means more jobs in Canada.
Air Canada is driving aerospace growth in this country. Major component parts of our new Boeing 787s are built here in Canada. Our Boeing 737s will see major components also built here, and of course the C Series will be built in Canada, and Air Canada and Jazz have large orders of Bombardier Q400s being built in Downsview.
To continue to succeed in this increasingly globalized airline industry, to sustain the 28,000 jobs we currently have here in Canada and to continue to create new opportunities, Air Canada must be allowed to compete and operate on a level playing field. This is why Bill C-10 is important to us as an airline and to Canada as a country.
As I mentioned earlier, the airline industry has greatly evolved since Air Canada was privatized. Until the 1980s, it was common that network airlines such as Air Canada insourced maintenance. It is in that context that the current maintenance provision of the Air Canada Public Participation Act was adopted by Parliament.
Due to economic and geopolitical unrest in the early 1990s, the airline industry suffered huge losses — recall the worldwide recession, volatility in fuel and the Gulf War. The 1990s were followed by the 2000s, where we witnessed 9/ 11, SARS and the war in Afghanistan and Iraq. Many legacy carriers failed in this time, and Air Canada itself went through a supervised restructuring in 2003 to 2004. It is no surprise that right around this time we saw the emergence of low-cost carriers that began to outsource all kinds of work, like maintenance, to reduce their cost and compete in a world where economies were constantly under threat.
Airlines around the world, and in particular legacy carriers, were forced to change to reduce their costs or they would disappear. Aveos was created and sold to become an MRO that would be able to perform not only our own maintenance but to attract and perform maintenance on other domestic and international carriers.
In this context, the MRO industry grew and consolidated, leading to a greater percentage of MRO work being outsourced. Globally, according to a report published by IATA, MRO outsourcing has grown from approximately 30 per cent in 1990 to over 50 per cent in 2008, and 65 per cent in 2013. The trend is projected to continue to increase with some sources projecting outsourcing to increase to 80 per cent. Aveos should have been well positioned to grow; however, such was not the case.
Air Canada did not take the closure of Aveos lightly. The abrupt closure was frankly a shock to Air Canada, and we sympathized with the job loss related thereto. In fact, prior to the closure, Air Canada repeatedly offered financial and other support to Aveos, even in the days leading up to its bankruptcy.
Since the closure of Aveos, we now have a better understanding as to why the company failed and was not able to succeed. Air Canada now does business with MROs around the world, like our competitors do, including here in Canada, who do the work more efficiently and more competitively. Recreating Aveos is not an option. It would significantly impact Air Canada's competitiveness and place Air Canada's financial sustainability at risk.
Allowing Air Canada to continue to find the best suppliers for the work is the right thing to do. As long as MROs are competitive and reliable, we will give them work, particularly here in Canada. As I've already mentioned, large portions of our fleet and those of our regional partners are already maintained domestically.
The nature of maintenance has also changed significantly. Line maintenance has taken on greater roles for airlines in Canada. Air Canada's line maintenance labour force has grown significantly over the last number of years, and today we employ close to 2,400 maintenance employees in Canada, more than any other Canadian airline. We perform, every day, highly specialized functions by airline maintenance personnel.
Bill C-10, tabled by this government, acknowledges the changes in the industry and would provide the critical flexibility Air Canada requires to be competitive on a global scale. No country in the world imposes such restrictions on their airlines, and no airline other than Air Canada faces similar restrictions in Canada.
As I stated earlier, a strong and healthy Air Canada is good for the country. We have agreements with the governments of Quebec and Manitoba to create centres of excellence. If these deals are respected and the centres of excellence are supported, we could see as many as 1,000 jobs created in Quebec and hundreds more in the province of Manitoba. We have already committed to providing work to new suppliers in each of those regions. Not supporting this bill would place in jeopardy these centres of excellence, since we cannot operate in an uncertain legal environment.
In closing, I would like to thank you for your time and your consideration around Bill C-10. Air Canada is committed to Canada, and no person around this table should ever doubt that. We are proud to carry the nation's flag, and we are working to be your global champion. However, to do this, we need to be able to compete fairly on a level playing field with our competitors.
The industry has evolved since Air Canada was privatized. We are no longer a Crown corporation. Let us compete as such. Parliament should do everything it can to foster Canadian companies on a global stage. A strong Air Canada means more jobs across the aerospace industry, air transportation and tourism in this country, so long as we look to the future and not to the past. Thank you very much.
The Deputy Chair: Thank you, Mr. Howlett.
Senator Plett: Thank you, gentlemen, for being here this morning.
Before I ask a couple of brief questions, I have one point to make. As I said in my second reading speech, I am a free market Conservative who supports privatization. However, I feel that the Government of Canada has put Air Canada in an unfortunate position. They made deals that affected provinces to ensure their support. They are now not delivering on those deals at the end of this process and are breaking their word, at least to my province of Manitoba. My biggest concern is that the government is asking us to do something when they have clearly broken a commitment. However, that is not Air Canada's fault, and I won't hold you accountable for it.
I have some questions, one I'm sure, if you were listening, you can speculate on because I asked it last night when all of you were here. I asked the question again this morning but I'm not getting answers. I hope you can tell me how much money Air Canada would save doing maintenance in Duluth, Minnesota, and in Israel versus in Canada.
Mr. Howlett: Sir, Aveos went bankrupt, which forced us to seek alternatives. We did that using a competitive bid process. When you go to a competitive bid process, a whole range of results can come out of it because of the whole range of activities that go into the creation of a tendering process. These bids were competitive against each other and produced a whole range of results. The difference in cost between the bidders largely depended on the type of service, foreign exchange and the work to be done. Basically, it was a highly competitive process.
We looked for competitive costs, efficiency, quality and a good turnaround time. Those are the drivers that go into the selection process around our MRO. Today, we have a competitive bid process out there that basically provides us with maintenance on a competitive basis globally. As I said, when Aveos went bankrupt, we had no alternative but to compete in an RFP process globally.
Senator Plett: I'm sorry that I'm not getting any answers from you either on this issue. I thought we were the politicians around the table.
The fact of the matter is that you have number crunchers somewhere in an Air Canada office that tell you what the best deal is. Now, Aveos was there. You know how much you were paying Aveos. How much money are you saving or how much more money are you paying for maintenance than you paid Aveos? There has to be a simple number somewhere. I'm not asking you about how much better the service is or whether you are suggesting that Canadian workers aren't absolutely top-notch. If that is your opinion, then say it; but I don't think it is. How much money are you saving by going out of country?
Mr. Howlett: As I said, when Aveos went bankrupt, we had no choice, sir, but to go to the market.
Senator Plett: Well, you're asking us to pass a bill, but you're not helping by not coming forward with answers instead of giving me what you gave me there. That does me absolutely no good.
My next question, then, sir, is: I believe there are a number of threats being offered as a result of us not passing this bill. One of them has been to the province of Quebec such that if this bill doesn't pass, then the purchase of the Bombardier C Series jets is in jeopardy. Another one I've heard from both the sponsor of this bill, Senator Pratte, and your presentation here today is that if this deal doesn't go through, the centres of excellence are in jeopardy.
Again, why are you buying Bombardier jets? Are you not buying them because they're the best jet in the world, or are you buying them to appease Quebec? I fly Air Canada, and contrary to some opinion, I believe Air Canada is a great airline. I want you to fly the best possible jet, and I hope you find something better than that CRJ I have to fly in back and forth to Winnipeg. Maybe this one will be the answer. Are you buying it because it's a good jet or are you buying it to buy off Quebec?
Mr. Howlett: Air Canada's decision to purchase the C Series was based on the opinion of Air Canada that it is the right airplane to do the mission and serve the market that the airplane is capable of.
Senator Plett: Why would that contract be in jeopardy if this bill doesn't pass?
Mr. Howlett: The point around this is that we are not prepared to make that scope of a financial commitment in an environment of legal uncertainty. There are alternatives to the C Series, as I'm sure you know. There are other manufacturers that make comparable airplanes.
Senator Plett: Going out of the country. So if we don't do what you want, you will go out of country to buy your jets. Centres of excellence. Winnipeg has already been shafted by the government. Are you telling me that if this bill doesn't go through, we'll get hit again and lose 150 jobs and a centre of excellence?
Mr. Howlett: Senator, I have no comment to make with respect to the relationship between the federal government and the Province of Manitoba. What I can tell you is if that this bill does not go forward, we will not create the centres of excellence in Manitoba and we will not create the centres of excellence in Quebec.
Senator Plett: So in plain words, you do what we want or we're going to stick it to you.
[Translation]
Senator Bellemare: I have some understanding of all the economic logic that dramatically changed the organization of the work, and aircraft maintenance in particular. It was at a time, as you mentioned, in the 1990s and 2000s, when all businesses were under tremendous pressure and when reorganization and subcontracting were taking place. I read the decision of the Quebec Court of Appeal. In the case of Aveos, which went bankrupt in 2012, it was indicated that you had already starting awarding maintenance contracts in the United States. I want to know why you started awarding maintenance contracts in Miami, Florida, and why this way of doing business then developed. What were the factors? Were they economic or technological? What drove your decision to start these outside activities?
[English]
Mr. Howlett: Thank you for your question. There are a number of issues that would have driven that decision. Cost is one. Air Canada, in that environment, was under significant financial constraints, as you will recall. We had just gone through a court-supervised restructuring. There was the economic collapse that went on in 2007-2008, as well as the capital costs necessary to support the new technology that was coming into airports. All of those factors in combination required us to look at other options, and that's what drove those decisions.
[Translation]
David Rheault, Director, Government Affairs and Community Relations, Air Canada: Air Canada honoured its agreements with Aveos until the end. As indicated in the evidence we provided to the court, Aveos did almost all the heavy maintenance until the end.
[Translation]
Senator Pratte: You said, in answering Senator Plett's questions, that there would be no centres of excellence if Bill C-10 is not passed because you're not willing to operate in what you called an uncertain legal environment. Would you please elaborate further on the impact of that uncertain legal environment that would prevent you from creating those centres of excellence?
Mr. Howlett: Well, the price tag of acquiring the C Series airplane is a significant bill or cost. We need to have a clear sense of the legal foundation that we have on a go-forward basis, and that is what is driving the need for the change in Bill C-10.
[Translation]
Mr. Rheault: I want to say more about the legal environment. After Aveos closed, proceedings were initiated with the Quebec Superior Court. Remember that, when Aveos closed, the federal government had legal opinions. It believed that, given the level of maintenance the company was carrying out in the regions set out by the act, Air Canada was already complying with the act.
[English]
In fact, there was also an Ontario Superior Court judgment which said that with the level of maintenance and the specialization of tasks done in line maintenance, Air Canada was already complying with the act. After Aveos closed, there was a challenge by the Quebec government before the court, and judgments were rendered which were not the same as the previous decision.
So all of that brings legal uncertainty. Now we're appealing that judgment before the Supreme Court of Canada, which will have to render a decision on this. The whole idea here is that four years of litigation has not created any jobs. Now we have a deal with both provinces to create jobs, but to implement this deal, we have to make sure that the threat of litigation is behind us and we can work together looking forward. That's why Bill C-10 is important. It's the foundation to start building maintenance capability in Canada.
Fitti Lourenco, Director, Government Affairs, Federal Government and Ontario, Air Canada: Senator, if I may, it's important to note that the previous government also supported the idea that Air Canada was living up to its previous obligations, and that was also backed by another court in Ontario. Just to add confusion to the situation, some courts agree with us but others don't. The environment is completely uncertain, and it's very difficult for us to make sound business decisions moving forward in this type of environment.
Senator Pratte: Thank you. Another point: The unions are not alone in having expressed concerns that if Bill C-10 is passed, practically all maintenance jobs remaining in Canada could be outsourced to outside of Canada. I think I have heard some Air Canada representatives say that this would be very improbable, if not impossible, because those are line maintenance jobs. Would you please elaborate?
Mr. Howlett: Certainly. Today, we have an unprecedented set of circumstances with all of our trade unions at Air Canada. We have long-term, stable labour 10-year agreements in place with all of our unions. Our maintenance workers are represented by the International Association of Machinists and Aerospace Workers, so equally, we have a 10-year agreement with them.
Number two, there are provisions in that collective bargaining agreement that define terms and conditions by which jobs can be outsourced. So to suggest that current line maintenance work would be outsourced, that is a provision that is protected by virtue of the collective agreement.
Mr. Rheault: And if I can add to that, line maintenance, operationally, is mostly performed at hub airports. These are in Canada, and this won't change. So the commercial reality and the operation of an airline actually dictates that line maintenance is performed where your operation is.
The proof is after Aveos' closure, there were few employees impacted in Ontario. Ontario was not part of the legal action, because although we have hundreds of maintenance employees in Mississauga and in the province of Ontario, few of them perform what they call heavy maintenance. Most of them perform line maintenance, if not all of them, so this will not be changed by the act, because this is driven by the operation.
In fact, the act permits Air Canada to be more competitive and grow its airline and acquire more aircraft. This will translate into new jobs to maintain these aircraft that we would fly in, fly out.
Mr. Howlett: Line maintenance is a creature of the size of your fleet, number one, and obviously the majority of our line maintenance personnel are in our major hubs, but we have line maintenance folks in other airports across the country that we serve as well.
Senator Pratte: Just to make one thing clear: If I understand correctly, line maintenance is what's done at night, right?
Mr. Howlett: Line maintenance is what's done at night. And as a customer, you may see airline maintenance personnel board and exit the airplane on a station stop. That is an airport function that's done at the gate and in hangars in off-hours.
Senator Pratte: And heavy maintenance was done by Aveos, for instance, and MRO is when the airplane is taken out of service for weeks.
Mr. Howlett: Yes, for longer periods of time. Over a number of weeks, it's disassembled and put back together again.
Mr. Rheault: We call it line maintenance because the aircraft remains on the line, which means it will still operate. The following day it will keep operating, whereas for heavy maintenance, we have to take it out of the line.
Senator Mercer: I just want to remind my good friend from Manitoba that you have jets operating to Winnipeg. Those of us from Halifax can't say that anymore. That's another argument for another day.
In your presentation, you talked about how, since the closure of Aveos, we have a better understanding as to why the company failed and was not able to compete. Air Canada now does business with MROs around the world, like our competitors do.
So why can't you answer Senator Plett's question when you clearly state you do business around the world? You do business with MROs, et cetera. If you go to that big book, your ledger, and add up the little numbers there, it will tell you how much money you spend on these MROs. It's a simple question. Your auditors could tell you. The clerk in the accounting department could probably tell you. I don't understand why you can come before this committee and not know the answer to that question. Senator Plett's question was not a surprise to anybody here today.
Mr. Howlett: No, I understand, and we've answered the question as best we can.
The second part of your point is that, yes, we have a better understanding as to why Aveos failed. As I said in my remarks, Aveos was built to provide maintenance services for Air Canada, but it was also created to attract third-party maintenance work from other markets across the country and around the globe. That didn't happen.
Senator Mercer: I would respectfully suggest that you didn't answer Senator Plett's question to the best of your ability because you didn't give him an answer.
Anyway, let's move on to another comment you made: Bill C-10, tabled by this government, acknowledges the changes in the industry and would provide the critical flexibility Air Canada requires to be competitive on a global scale. The word "flexibility" in this context means job loss to many people. When they see that word "flexibility," it means "not the same." It means "different." It means "change." It means that the jobs that are currently there may be at risk. How are you going to reassure the workers, and how are you going to reassure this committee, that passing this bill will not create job loss in the sector in Canada?
Mr. Howlett: Well, number one, this is not a bill about setting up an environment for job loss. The degree to which jobs are protected today within Air Canada for our maintenance and technical personnel is as defined in the collective bargaining agreement.
Number two, this is about an MRO. This is about overhaul. This is not about line maintenance. There are over 2,400, 2,500 maintenance jobs today at Air Canada.
Mr. Lourenco: Flexibility, in this sense, also means that we are allowed to seek or put out to a competitive tendering process MROs within Canada, like Premier Aviation in Trois-Rivières. It's important for the committee to remember that those jobs, under the ACPPA, are technically illegal because they reside outside of the three prescribed areas in the original legislation. So, by flexibility, we also mean within regions of Canada.
We heard from senators yesterday saying that the provincial requirement should be taken out of the bill altogether. I don't think we would oppose that, but we are obligated to these regions.
Senator Mercer: I'm one of the senators who would be in favour of that because of the very strong aerospace industry that we have in Nova Scotia. But it's there, and we'll have to work around it. The aerospace industry in Nova Scotia is specialized, and it's doing a good job in creating some fabulous jobs there.
You also said that the MRO industry grew and was consolidated, and MRO outsourcing has grown from approximately 30 per cent in 1990 up to 65 per cent in 2013. You're projecting that outsourcing will increase to 80 per cent.
Mr. Howlett: That's a statistic that was defined by IATA.
Senator Mercer: So why is that?
Mr. Howlett: Because it's a global industry, sir, and this is an industry that competes in a global marketplace. Basically, as technology has changed and with the significant investment that's required to provide support to all of those airplanes, it's taken on a global context. If you look across most of the legacy carriers, most of the legacy carriers have basically outsourced all of their heavy maintenance work because of the competitive nature of the business, the changing nature of the business, and it's moved to a global platform.
Mr. Rheault: If I can add to this, there is also the fact that the aircraft are becoming more and more specialized, so there are economies of scale for a service provider to specialize in a certain type of aircraft and to maintain the aircraft of many airlines. These economies of scale, when you are operating in an environment that is highly competitive, are important to keep delivering a good price to customers.
Senator Mercer: My final comment: In centres of excellence, if we proceed, one of the things that we're going to have to do is do a better marketing job of the centres of excellence because we don't want them to only have Air Canada as a customer. We need them to reach out to others.
Your final sentence in your presentation is: "A strong Air Canada means more jobs across aerospace, air transportation and tourism in Canada." I think most of us here would agree with that, and, even though I have been fairly aggressive this morning, I want you to know I still do believe that. I joke a bit about luggage, but they haven't lost my bag in about eight years. We are supportive of Air Canada and of the sector.
Senator Eggleton: First of all, let me ask you about the centres of excellence. You are helping to establish them in Quebec and Manitoba, but not Ontario? Ontario is the third centre that's mentioned. Of course, you also have maintenance work done in other provinces as well. Why did you just stop at those two provinces?
What is the extent of your commitment to these centres of excellence? I don't know if you want to give dollar figures, but give me some elaboration on why we should hold a lot of confidence in them creating the jobs that you say and maybe even, as Senator Mercer has been saying, going beyond just Air Canada and maybe attracting other airlines to do some of their maintenance there.
Mr. Howlett: Let me deal with the first part of your question with respect to Ontario. As you know, Toronto is our global hub. Before, now and, we expect, tomorrow, it is our largest operation, and it is home to the vast majority of our maintenance personnel, as we speak today.
Secondly, with respect to the centres of excellence, one in Quebec and one in Manitoba, basically, we have an expectation that, with respect to the creation of the centre of excellence in Quebec, it will be a world-class centre of excellence and provide upwards of 1,000 jobs and set the stage, in our view, to be able to attract, on a global basis, third-party work from around the globe. In fact, it will be, if you stop and think about it, the premiere centre of excellence for support around the Bombardier C Series airplane.
With respect to Manitoba and in conjunction with discussions with our suppliers Hope Air and Airbase, as well as a significant contractual arrangement with another partner of ours, Cargojet, to create a centre of excellence in Manitoba, that again ought to be able to provide a platform to not only do the work generated by Air Canada, when you look at Hope Air and Airbase, but equally able to attract third-party work from other Canadian operators and international operators as well.
Senator Eggleton: Does your extent of support have a time frame to it? Are you there for five years, three years or whatever?
Mr. Howlett: In the case of Manitoba, that is almost immediate, 2017. In the case of Quebec, it's 2019, after the delivery of the C Series airplane.
Mr. Rheault: In Quebec, it's a commitment for 20 years.
Senator Eggleton: Oh. And in Manitoba?
Mr. Rheault: It's a commitment to start establishing the centre of excellence in 2017, and as Mr. Howlett mentioned, it's very important that these suppliers be in a condition to attract other carriers because that's the model now. If you want to be competitive, you have to have the economy of scale. So that is the value of these centres of excellence.
Senator Eggleton: Let me move on to another question rather than digging any deeper into that one.
You said in your opening remarks that you've undertaken to transform Air Canada into a global champion. That's commendable. You carry this country's flag around the world, and it's important for us. Even though you're now a private sector company, it's still an important national asset.
Apparently, other global champions or top airlines that carry the flag of their country, national airlines as they're sometimes called, have much more of their maintenance done in their countries. This is what we've heard. So why wouldn't you be trying to do what they do? If they're global champions and national flag carriers and do most of their maintenance in their countries, why are you continuing to slide in the other direction of outsourcing?
Mr. Howlett: I think if you look across the list of legacy carriers, senator, there is a very mixed story about work that is done by those flag carriers in their country versus work that is done outside their country, or a combination where some is done inside the country and some is done outside the country.
As it is today, we do a lot of our maintenance work in Canada. We do a lot of our maintenance work with Premiere Aviation in Trois-Rivières. There's engine work done in this country as well. So my point is it is not to the exclusion.
Senator Eggleton: Would it be fair to say that you would aim to do as much in Canada as these other flag carriers, these other global champions, may be doing in their countries?
Mr. Howlett: Absolutely, so long as that is a business decision made based on competitiveness, quality, all of the issues that we talked about.
Mr. Rheault: If I can add, to our knowledge, there is no airline across the world that is subject to restrictions of which city should provide maintenance.
Senator Eggleton: But presumably there's some incentives provided by the government?
Mr. Rheault: Then it becomes a business decision. With the quality of the industry we have here, we can work on this and grow the industry.
Senator Eggleton: As opposed to a legislative requirement?
Mr. Rheault: Exactly.
Senator Eggleton: Let me ask you finally about the level-playing field with your competitors. You went through some rough times; you pointed that out here. You're now in a very profitable situation. You're doing quite well. It's been suggested you're doing very well for the shareholders, but what about the consumers? I don't recall seeing any reduction in prices. In fact, you talk about the volatility in fuel prices. It certainly went up when the fuel prices were going up, but I haven't seen them coming down since the fuel prices came down. So what about the consumers in all of this profit-making that you're going through? Why are you so concerned about a level-playing field at this point in time when you're in a much better financial strength than you ever were?
Mr. Lourenco: Senator, I can tell you the OECD ranks Canada as the fifth-highest cost structure in aviation in the world. Certainly, that's not a matter of airfares, that's a matter of the taxes and charges imposed on our base fare. So that's your air traveller security charge, GST that's taxed on everything else, your airport improvement fee. The fifth- highest cost structure in the world.
Statistics Canada recently said airfares in this country have gone down for the last six years. We have done our part to pass on savings to consumers, to find efficiencies to deliver to the consumer, and repeatedly we've gone to government, past and present, to make our case that we are becoming less and less competitive vis-à-vis our international competitors because of the existing cost structure. It's not because of a lack of foreign ownership restrictions in the country. It's not for any other reason than the cost structure in this country is prohibitively high.
In fact, one of the reasons why a lot of carriers won't set up shop in Canada is not because of foreign ownership or lack of investment opportunity, it's because it's too expensive to operate here. Why would a foreign carrier come to Canada when they can operate in the United States and pull in Canadian travellers to border airports? We even have a Canadian carrier, Sunwing, that operates out of Buffalo to find those savings.
Again, I would point back to the recent StatsCan report that says that airfares have gone down for the last six years in this country. To the consumer, they seem relatively stable because the other fees aren't coming down, and as a matter of fact we'll probably see a few more tacked on in the near future.
Senator Eggleton: If we're number five, who are the four ahead of us? Where's the United States?
Mr. Lourenco: I can certainly get back to you on that.
Senator Eggleton: Where's the United States, though?
Mr. Lourenco: To be honest, I can't recall.
Mr. Rheault: The other thing, if I can add, is the fact that Air Canada is operating now on a more financial, sustainable and stable basis is also beneficial to the country and to the community we serve. This summer we're launching 22 new U.S. and international routes. We're launching destinations like Montreal-Casablanca, Montreal- Lyon; we have launched Vancouver-Delhi, Toronto-Seoul. So all these new activities create jobs and help connect Canada to the world.
Mr. Howlett: That is a real benefit to consumers, because it basically gives the Canadian consumer greater access to wherever they wish to go in the globe.
Mr. Lourenco: And to the economy.
Mr. Howlett: And to the economy, absolutely.
Senator Eggleton: If I can slip in one more question?
The Deputy Chair: No, you will have to go to second round.
Senator Black: My question has been asked and answered, so I'm happy to defer to Senator Eggleton.
The Deputy Chair: He'll still have to wait. Senator Runciman?
Senator Runciman: Several of my questions have been answered, but I do want to pursue the line of questioning that Senator Pratte raised in relation to line maintenance. There are roughly 2,400 workers, and Mr. Chartrand last night raised the issue and expressed concern about the future of those 2,400 workers.
Now you've talked about the major hubs. Are Air Canada's major hubs all in Canada? Is that the way that process works?
Mr. Howlett: Yes. Our major hubs are: Toronto is our number one hub; Vancouver, Montreal and Calgary I would describe as our four major hubs. And then we have other large domestic operations in airports across the country, Ottawa, Edmonton, Halifax and things of that nature, all of which have maintenance personnel, line maintenance people in those bases.
Senator Runciman: So what you're saying is it would never be viable or feasible to move line maintenance out of the Canadian hubs?
Mr. Howlett: Correct.
Senator Runciman: So no other major international carrier has line maintenance outside of their own country?
Mr. Howlett: The vast majority of their line maintenance is in their home country because that's where a large part of their operation is.
Mr. Rheault: In fact, the trend is the reverse. More maintenance tasks are performed on "line" because it makes more economic sense. The trend is really the reverse, to take a task that is performed at heavy maintenance and include them in your line maintenance program so it's more efficient.
Senator Runciman: I was reading some news articles related to the Aveos decision, and there was a suggestion in one of the articles that Air Canada had given guarantees when the spin-off of Aveos occurred, assurances that the company was viable. Of course that proved not to be the case. I guess that's why there's some legitimacy to the concern being expressed about line workers' jobs.
In your presentation here today, you talked about, "We're no longer a Crown corporation, we are a private company, so let us compete as such." How do you define a private company?
You frequently turn to the government, and you still have things where you're dictated to with respect to where your corporate headquarters will be located. I'm trying to find out where you are going with your definition of a private- sector company. How do you see this evolving over the next 10 years?
Mr. Howlett: We said that in the context of the question before us here with respect to Bill C-10. Basically, our point here is that, given the market that we operate in and given the fact that it is a global industry, that when it comes down to the performance of maintenance activities that, as a private company, we be allowed to compete without legislative constraint in terms of where we do the work.
Sen Runciman: But you don't see yourself turning to the government at every difficulty you face, like pension obligations, for example?
Mr. Howlett: No, we don't see that. That's not our intention here at all.
Senator Runciman: Okay. We shall see.
The Deputy Chair: We have about 10 minutes left, so I'd ask everybody to keep their questions and answers short.
Senator Unger: I have a couple of questions regarding the OECD figures that put Air Canada fifth-highest in the world. You talked about all of the different costs that make that number five instead of two. Are labour costs factored into that?
Mr. Howlett: I wouldn't say so. Those are costs, as Fitti said, like third party charges, taxes, levies, security, airport rent, all of those types of things. That's the driver, not labour.
Senator Unger: You also stated Air Canada cannot operate with uncertainty, and yet you are providing no certainty whatsoever with regard to your obligations to Manitoba, for example, and the centres of excellence. So how are they supposed to take your word when it's not in the legislation?
Mr. Howlett: Madam senator, we've actually had, I think, very good discussions with the Manitoba government around the creation of a centre of excellence. We've clearly defined what the centre of excellence would be, the type of work that would go into the creation of the centres of excellence and gave an initial projection in terms of employment numbers, and we actually have, today, a term sheet in the contract between ourselves and the Manitoba government to create those centres of excellence, on the assumption that Bill C-10 gets passed.
Senator Unger: So it's contingent on the bill passing; and if no bill, then —
Mr. Howlett: Then we would provide support for —
Senator Unger: So there's no certainty there, really?
Mr. Howlett: As I said, if there is any certainty here, it is that if Bill C-10 does not pass, the centres of excellence, both in Manitoba and Quebec, will not proceed.
Senator Unger: I'd like to ask just one other question.
With regard to the lawsuit in the Supreme Court, if they end up ruling against Air Canada, what do you see as the possible implications? What will that look like?
Mr. Rheault: The outcome of the legal action is an example of an uncertainty. This is a declaratory judgment, and of course we have strong arguments and we believe that we will win that case and overturn the decision of the Supreme Court. But if the Supreme Court maintains the previous decision, then you will have other proceedings as to how to apply these decisions, which means years and years of litigation, again.
That's why we're saying, instead of taking the litigation path, where there is no guarantee and it's only that you will have uncertainty, we have an agreement with both provinces that were involved in these lawsuits to create jobs. That's why we believe that our proposition for centres of excellence offers certainty and job creation.
Senator Unger: So there's no signed contract, just an understanding?
Mr. Rheault: There are agreements with both provinces. Both provinces are satisfied with the agreement we have with them, and that's the reason why the federal government was prepared to modify the ACPPA.
Mr. Howlett: But it's to create that environment of certainty.
[Translation]
Senator Boisvenu: I have only one question. You said that, without Bill C-10, there would be no centres of excellence. What would you say if we propose an amendment to the bill to include the requirement to build centres of excellence, and then vote in favour of Bill C-10?
Mr. Rheault: We have a commitment.
Senator Boisvenu: That's not my question. What would you say if the bill included the requirement to build two centres of excellence and we then voted for Bill C-10?
Mr. Rheault: Bill C-10 must give us the necessary flexibility.
Senator Boisvenu: That's not my question. Yes or no. If Bill C-10 included the requirement to build the two centres of excellence, would you be fine with that?
Mr. Rheault: No. A requirement that specific shouldn't be included in the legislation.
Senator Boisvenu: Thank you. I have my answer.
[English]
Senator Ataullahjan: My question is a bit different. I would like to know whether you have any cultural sensitivity training for your staff. I have experienced small incidents, but the one that compelled me to write to the president and CEO is when passengers were boarding, I was met by one of your staff who made me feel as if I didn't belong in zone 1, and she asked me again and again if I was a zone 1 passenger? She sort of looked at me as though I didn't even belong in business class. A colleague of mine, a fellow senator, was with me, and she was not subjected to that kind of questioning.
And an attendant who paged my daughter said, "I wonder if she even speaks or understands English?" My daughter happens to be a PhD student and can speak four languages.
Ten days ago at the Ottawa airport I saw a pregnant Oriental lady who mistakenly came to board when zone 1 passengers were boarding and was told she was in the wrong line and to get out. I regret that I did not turn around and come back and tell the lady she was being rude.
I have the letter that I did write to your president.
My question to you is: The face of Canada has changed, but even with cultural sensitivity training, these kinds of incidents can happen because, unfortunately, it's the society that we live in. What really reflects on the company is in the way you choose to respond to these incidents when they're brought to your attention. By hiding behind bureaucracy and being dismissive, you're sending the message to customers that you do not care about ending prejudice.
This is an unacceptable message for Canada's flag carrier and for a national airline to send. The majority of the people who work for you are wonderful, caring and welcoming, but I have been watching and keeping track of this, and I think it's a very important issue to address. Thank you.
Mr. Howlett: Let me comment on that. Thank you for bringing that forward. First and foremost, on behalf of everybody at Air Canada, we apologize if that was in fact how you were treated. We actually take a significant amount of pride in the fact that we are a company that is staffed by the multicultural society we are as Canadians. We have more than 30 different languages spoken at Air Canada, and the vast majority of those are in public contact positions. We always try to have language-qualified people on the particular routes that the airplane is destined for, as well as in our customer contact staff positions in airports and call centres across our network.
As well, you may recall that very recently, we were cited as one of Canada's best employers when it came to diversity.
It's actually good to get that type of feedback because it is a significant priority as we move to transform this company and move into being a global champion to address those types of issues.
Senator Ataullahjan: When we email and ask for responses, all we get is fluff. We don't get anything serious back. In my case, I said the date that it happened and named the gate where it happened. Obviously, everybody knew exactly who it was, but I did not get a satisfactory answer. The majority of the people who work for Air Canada are incredible, caring and welcoming. I just want to be on record.
Senator McCoy: I'll follow up a line of questions, the last of which was by Senator Boisvenu, and put my question to you another way. We've heard you say unequivocally that you will not build centres of excellence in Winnipeg and Montreal if Bill C-10 does not go forward. Will you give us your unequivocal answer yes that you will build centres of excellence in Winnipeg and Montreal if Bill C-10 passes?
Mr. Howlett: Unequivocally, yes.
Senator McCoy: Thank you.
Senator Mitchell: The heart of this bill, it seems to me, is competitiveness. If ever there was an industry that is competitive, that has to be competitive, it's the airline industry. We forget. I remember the 1990s when Air Canada was on the edge all the time and into the early 2000s. In fact, some argue that airline seats are a commodity and the only thing they compete on is price; there's nothing beyond that. There's nothing wrong with profits. Profits strengthen you in the good times so you can survive the more difficult times. This is a very cyclical industry, and you're on the edge all the time.
Clearly one of the elements of competitiveness is a stable legal environment. You've emphasized that. You've emphasized that being able to go regional might make you more competitive and reduce costs. Could you summarize how it is that this bill will make you more competitive so you can sustain Air Canada in Canada, so you can sustain your world position and so you can sustain jobs and create more jobs in Canada?
Mr. Howlett: This bill will allow us, foremost, as we said, to create the legal certainty that will equip us with the confidence to make a significant investment in the Canadian aerospace industry. This will incentivize us to go forward and be an architect of building a platform around centres of excellence in Quebec and Manitoba that will be competitive on a global stage, allowing those centres of excellence to grow and further advance jobs within the Canadian aerospace industry because they will be world-class players.
Senator Plett: In your presentation, you say that since the closure of Aveos, you have a better understanding of why the company failed and was unable to succeed. Air Canada was their largest customer. You also say you offered them financial support. I guess, chair, I'm going to break your rule and ask two questions: Why did they not accept your offer of financial support? If you now know why they failed, why did they fail?
Mr. Howlett: They failed because of their inability basically to attract work other than what Air Canada had. They were competing, going to tender and attempting to get work from other carriers around the world. In fact, they lost a major customer, Delta, which was a huge part of their business at the time. That was one thing, in our view, that contributed, amongst other things, to their failure, which provided us some insight to a better understanding of why they failed.
As I said in my remarks, the failure of Aveos came as a shock to Air Canada. It put Air Canada's back against the wall. Where were we going to get our airplanes fixed? In an attempt to diminish that risk, we offered to Aveos, which was an independent company, some financial support to allow them to stay afloat, but they chose not to do it.
Senator Plett: Did they give you a reason?
Mr. Howlett: In all honesty, senator, I was not a party to that discussion, so I don't know the answer. All I know is that they didn't take us up on the offer.
The Deputy Chair: Thank you, everyone, for participating this morning. I'd like to thank Mr. Howlett, Mr. Rheault and Mr. Lourenco for participating in the hearing.
Our next item of business today is clause-by-clause consideration of Bill C-10, An Act to amend the Air Canada Public Participation Act and to provide for other measures. The bill proposes to modify the existing requirements governing where Air Canada must carry out its aircraft maintenance activities, as well as the type and volume of those activities. The bill also provides for certain other measures related to this obligation.
I remind members that the committee has held two meetings on Bill C-10, hearing from the Minister of Transport and 13 witnesses, and it has also received five written submissions.
Before we begin, I advise members that we have two officials, one from Transport Canada and one from Justice, who can be called to the table to answer any technical questions that members might have: Sara Wiebe, Director General of Air Policy; and Daniel Blasioli, Senior Counsel.
I also remind senators of a few points in terms of the mechanics of the process. When and if more than one amendment is proposed to be moved in a clause, amendments should be proposed in the order of the lines of a clause. Some amendments that are moved may have a consequential effect on other parts of the bill. We will endeavour to keep track of these places where subsequent amendments need to be moved and will draw your attention to them if necessary.
Because no notice is required to move amendments, there has been no preliminary analysis of the amendments. If any member wishes to propose an amendment, please allow colleagues and staff sufficient time to review them before opening the floor to debate.
I remind senators that if there is ever any uncertainty as to the results of a voice vote or show of hands, the most effective route is to request a roll call vote, which obviously provides unambiguous results. Senators are aware that any tied vote negates the motion in question.
Are there any questions on any of the above?
Senator Plett: No question, but I have a few comments before we start. I simply want on the record my tremendous disappointment with the federal government and the way they handled this up to and including the amount of time we were given to study this bill and the timing when we received it. Senator Pratte spoke pretty much right away. I certainly spoke at the first available opportunity. As you said, chair, we have had two meetings, which I think is insufficient to study something of this magnitude. This is having negative effects on my province. I won't belabour that any longer.
I will not propose any amendments at committee. I reserve the right to do that at third reading. I personally will support the bill, on division, all the way through at committee stage. However, as I said, I clearly reserve the right to bring amendments forward at third reading.
The Deputy Chair: Thank you, Senator Plett. Does anybody else have comments?
Is it agreed that the committee proceed to clause-by-clause consideration of Bill C-10?
Hon. Senators: Agreed.
The Deputy Chair: Shall the title stand postponed?
Hon. Senators: Agreed.
The Deputy Chair: Shall clause 1 carry?
Some Hon. Senators: Agreed.
Senator Plett: On division.
The Deputy Chair: Shall clause 2 carry?
Some Hon. Senators: Agreed.
Senator Plett: On division.
The Deputy Chair: Shall clause 3 carry?
Some Hon. Senators: Agreed.
Senator Plett: On division.
The Deputy Chair: Shall the title carry?
Some Hon. Senators: Agreed.
Senator Plett: On division.
The Deputy Chair: Shall the bill, as amended, carry?
Some Hon. Senators: Agreed.
Senator Plett: On division.
The Deputy Chair: The bill is carried.
Does the committee wish to consider appending observations to the report?
Hon. Senators: No.
The Deputy Chair: Is it agreed that I report the bill to the Senate?
Hon. Senators: Agreed.
Senator Eggleton: Will it be reported this afternoon?
The Deputy Chair: Yes.
To other business before we finish, we require an in camera meeting to discuss drafting instructions for the study on crude oil transport. Do you want to postpone that to the next time we meet? All right, that will be postponed until the next time we meet.
(The committee adjourned.)