Proceedings of the Standing Senate Committee on
Transport and Communications
Issue No. 4 - Evidence, June 20, 2016
OTTAWA, Monday, June 20, 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 4:05 p.m. to give consideration to the bill.
Senator Michael L. MacDonald (Deputy Chair) in the chair.
[English]
The Deputy Chair: Honourable senators, welcome to this meeting of the Standing Senate Committee on Transport and Communications. Today, the committee is examining Bill C-10, An Act to amend the Air Canada Public Participation Act and to provide for certain other measures. This bill would modify 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.
During the first hour, we will hear from the federal Minister of Transport and his officials. During the second hour, there will be a panel of two ministers from the Government of Manitoba, and a witness from the Manitoba Federation of Labour. They will appear by video conference. During the final hour, there will be a panel of witnesses from the International Association of Machinists and Aerospace Workers, in Canada, and the Aerospace Industries Association of Canada.
As the committee begins its examination of this bill, we welcome the Honourable Marc Garneau, Minister of Transport. He is accompanied by Sara Wiebe, Director General, Air Policy; and Daniel Blasioli, Senior Counsel.
Hon. Marc Garneau, P.C., M.P., Minister of Transport: Thank you, Senator MacDonald, for inviting me to appear. I believe it is important as a minister to appear before the Senate committee on a bill that I tabled. This is my second appearance in front of this committee, and I hope there will be many more in the future. I thank the committee for taking on my request to study automated vehicles and connected vehicles. However, I'm here to talk about Bill C-10.
[Translation]
I am pleased to appear today before the Standing Senate Committee on Transport and Communications to study Bill-C10, which seeks to amend paragraph 6(1)(d) of the Air Canada Public Participation Act.
The purpose of the bill is to help Air Canada become more competitive in the constantly changing aviation industry by giving it more flexibility in the aircraft maintenance field. The bill continues to support Canada's aerospace industry by reaffirming the government's expectations that Air Canada ensure a certain level of aircraft maintenance work is carried out in certain regions of the country.
[English]
This bill seeks to amend section 6(1)(d) of the Air Canada Public Participation Act, which currently sates that Air Canada must include in its articles of continuance "provisions requiring the Corporation to maintain operational and overhaul centres in the City of Winnipeg, the Montreal Urban Community and the City of Mississauga; . . ."
Bill C-10 would replace the mention of three specific cities with reference to the provinces of Manitoba, Ontario and Quebec. In addition, Bill C-10 proposes removing reference to "operational and overhaul centres" and replacing it with "aircraft maintenance activities," noting that this includes work related to airframes, engines, components, equipment and parts.
Bill C-10 would also clarify that Air Canada has no limits in terms of the volume or type of aircraft maintenance activities it will perform in Manitoba, Ontario and Quebec or the level of employment it will maintain.
[Translation]
It will show that Air Canada provides aircraft maintenance in those provinces, and will also help the company organize its activities in a way that's better adapted to the development of the current and future aviation industry. Ultimately, the bill will help Air Canada be more competitive in an aggressive global market. If Air Canada were unable to obtain the best possible value for its money, it would mean higher costs for the company and, in the end, for its service users.
The announcements made by Air Canada earlier this year lead us to believe that we should act now. The fact that Air Canada will work with the Quebec government to create a centre of excellence for aircraft maintenance, after purchasing about 75 C Series Bombardier aircraft, is very good news for the industry. According to the Quebec government, the centre of excellence could create up to 1,000 jobs in Quebec's aerospace industry, on top of the jobs created in aircraft manufacturing.
Following this news, the Quebec government and Air Canada announced an agreement to discontinue the litigation concerning Air Canada's compliance with the Air Canada Public Participation Act, subject to the company's purchase of the Bombardier aircraft. This announcement is important to us, because we believe these agreements will yield greater benefits for Canadian workers in the industry.
[English]
Air Canada also announced its intention to work with the Government of Manitoba on a collaborative approach which could lead to the creation of a Western Canada Centre of Excellence in that province. If implemented, this centre may result in the creation of 150 new jobs in the aircraft maintenance sector as of 2017, with the potential for additional jobs in the future.
These positive developments led us to believe that this is an ideal opportunity to modernize the Air Canada Public Participation Act and to allow Air Canada to respond more effectively and efficiently to the changing market conditions.
For Air Canada to be competitive into the future, it must be able to adapt its supply chain to manage its costs, as all of its competitors are doing. As we all know, it employs about 30,000 people.
Bill C-10 will help Air Canada continue to maintain the high safety standard that Canada requires and become more competitive, which will generate benefits that will ultimately be passed down to customers. Given the role of Air Canada in providing services to the Canadian marketplace, this improved competitiveness could also have a positive impact for customers of competing airlines by generally driving down costs across the board.
Let me remind you that only Air Canada is subject to the restrictions on its operations that we see in the Air Canada Public Participation Act.
In a market that is as global as the airline industry, room for flexibility and innovation is necessary to ensure medium- and long-term viability.
[Translation]
According to an aviation expert who spoke before the House of Commons Standing Committee on Transport, Infrastructure and Communications:
— airlines operate with about a 2 per cent profit margin. It's one of the thinnest profit margins of any transport industry, and we can and do see airlines go bankrupt. We've had 60 airline bankruptcies in Canada, and Air Canada itself has gone through one bankruptcy.
If you choose to have a competitive environment as the basis for your policy, there is a range of competitive issues there, and maintenance is one of the important ones because it's such a large portion of aircraft cost, and you have one airline that has to compete with other airlines that don't have these restrictions.
The 2012 aerospace review brought to light the fact that, in developing countries, the number of low-cost suppliers providing aircraft maintenance services was growing significantly. Many of the suppliers are closer to growth markets such as Asia, Latin America and the Middle East.
[English]
It is interesting to note that despite the closure of Aveos in 2012, the aircraft maintenance, repair and overhaul sector in Canada has experienced significant growth in recent years. Based on data from the 2015 report The State of the Canadian Aerospace Industry, this sector experienced strong economic growth from 2004 to 2014, with a 37 per cent increase in direct GDP.
[Translation]
It thus seems that the alternative to Bill C-10 is not the status quo that existed before Aveos's bankruptcy in 2012. The closure was a hard blow for the workers in the industry and their families. I would like to extend my deepest sympathies to the people affected by the closure. However, contrary to what we've been led to believe, there's no reason to think the ongoing litigation would ultimately restore the exact number of jobs that existed when Aveos closed or enable the same employees to have jobs again. In short, since the parties chose to resolve the litigation, we can start building the industry's future to make it more globally competitive.
Lastly, Bill C-10 will give Air Canada more flexibility in its economic choices, and will ensure it remains on track to undertake aircraft maintenance activities in the three provinces mentioned. Bill C-10 will enable Canada to maintain a strong and competitive aviation industry, while helping to create jobs for highly skilled workers in the aerospace industry. Thank you.
[English]
The Deputy Chair: Thank you, minister, for your remarks. We will go to questions from the senators, and I will start with the critic of the bill, Senator Plett.
Senator Plett: Thank you, minister, for being here.
I have a comment or two before I ask a few questions. You referred to Air Canada being the only airline that is subject to the restrictions in the Air Canada Public Participation Act, and of course it is an Air Canada Public Participation Act. Maybe I misunderstood you, but I'm not sure why anyone else would be subject to that when the act is specifically their act.
In the house committee you made a comment that this legislation, above all, would create Manitoba and Quebec jobs, and yet four times the bill itself says the following:
. . . the Corporation may, while not eliminating those activities in any of those provinces, change the type or volume of any or all of those activities in each of those provinces, as well as the level of employment in any or all of those activities.
So I guess not eliminating all jobs could mean that one person could be left standing and then the bill itself would meet what you are saying.
Where does this legislation create Manitoba and Quebec jobs? Air Canada, supposedly, has reached a deal with Manitoba and Quebec, but where does this legislation itself create jobs?
Mr. Garneau: Thank you, senator.
To address your first point: yes, it is called the Air Canada Public Participation Act. It was created in 1989, and it only addressed Air Canada and imposed the following restrictions on the company when it was being privatized: first of all, restrictions on where maintenance should be carried out, which I've elaborated on; second, that its headquarters had to be in Montreal; and third, that it had to respect the Official Languages Act. Fourth, it could not have higher than 25 per cent foreign investment, but that is common to all airlines in Canada. The other three are not restrictions that have been placed on others, such as WestJet, Porter or Air Transat. They are free to do their maintenance in Canada or anywhere in the world that they choose. They have no requirements with respect to the Official Languages Act, and they can choose where they put their headquarters.
While Prime Minister Mulroney, the Prime Minister at the time, wanted to privatize Air Canada, he basically tied its hands with a number of requirements. That's really what I was getting at by saying that Air Canada has certain restrictions placed on it that do not apply to the other airlines.
With respect to the act itself not being specific about jobs in Manitoba, nor is it specific about jobs in Quebec. However, what did happen was that Air Canada and the Quebec government came to an agreement, and separately Air Canada and the previous Manitoba government came to an agreement, which is in fact the basis on which those provinces agreed to drop their litigation. And the federal government decided to proceed for two reasons. One is because of this intention to drop the litigation because of an arrangement with each of the provinces; the second is for the reasons I elaborated in my opening, which is that we felt that it was important to give Air Canada more of a level playing field.
With respect to Manitoba, a communiqué was published in March — and I would be happy to circulate it — that Air Canada would create 150 jobs in the province of Manitoba. I believe that is an intention that will be respected by Air Canada. I also believe that there's the possibility of more for Manitoba, because — and I will say right from the outset; I've said this to you before — Manitoba is an important aerospace centre in Canada. When I was the president of the Canadian Space Agency, I did business with Bristol Aerospace. They built a satellite for us. I am very familiar with the capability of Winnipeg as a nucleus of aerospace expertise, and we want to build that. We want to build the aerospace industry for this country because it's the fifth largest in the world.
I can assure you that the Government of Canada is committed to growing an area of strength for Canada, and that includes Winnipeg.
Senator Plett: Thank you, minister. Let me assure you I don't think anyone — certainly not me — doubts your sincerity in wanting to deal with that. We, of course, were told that a number of years ago as well, when we dealt with the CF-18. I don't think Manitoba has ever quite gotten over that. Certainly it wasn't your government, minister, but nevertheless.
What I was referring to was that the legislation doesn't create jobs. Air Canada is saying that maybe they will.
You have said that you want to make sure the aerospace industry in Manitoba grows, and so on. You referred to the previous government agreeing to drop their lawsuit as the Quebec government did. I have shared with you some commitments that I have been told were made to the previous government — and the previous premier was quite emphatic that these commitments were being made — by a minister from Manitoba, the employment minister in Manitoba. Without saying it, you certainly gave me the impression you weren't necessarily aware of those commitments.
Have you, since last Tuesday, had an opportunity — or has somebody in your government had an opportunity — to ask Minister Mihychuk what commitments she in fact made? She said what commitments she made. Is the government ready to honour those commitments to Manitoba?
Mr. Garneau: Thank you, senator. As I understand it, there had been discussions, although I did not initiate these discussions, nor did Air Canada, with the previous government about building up an aerospace training capability in the province of Manitoba.
Just for background, this concerns the Red River College, which I know you are familiar with, Senator Plett. The federal government and the provincial government recently co-funded, 50 per cent each, a centre for aerospace training. That is already water under the bridge.
I'm very happy to tell you that the Government of Canada has now agreed with the Government of Manitoba to entirely finance phase three of the Centre for Aerospace Technology and Training at Red River College. This is a $10 million program, and it will be funded $2 million a year for the next five years.
I think this is a significant piece of good news for Manitoba, because it builds up an ability to train people who work in the aerospace field. I think this will be of great benefit to Winnipeg and to the province of Manitoba.
The federal government is continuing to work with the Government of Manitoba. As I said before, we want to build the capability because it's an important capability. It has critical mass, and we will continue our efforts to build the aerospace industry in the country, including in the Winnipeg area.
Senator Plett: Thank you. Chair, I do need to put a supplementary here, please.
First, I'm very familiar with Red River. That's where I went to school, and I'm certainly happy that whatever funding —
Mr. Garneau: It's just a coincidence.
Senator Plett: Yes, I'm sure. Nevertheless, on behalf of everybody at Red River, let me say thank you, minister. However, if I were to suggest that it was half of the money that Minister Mihychuk has promised, what would you say to that? I find it strange that Minister Mihychuk has not been called on the carpet somewhere to tell everybody what she promised the previous government. Have you done that?
Mr. Garneau: No, I have not. I was not familiar with what you mentioned to me and I have not verified that. However, I can bring you up to date on what the Government of Canada is committing, namely, that program, phase three of the Centre for Aerospace Technology and Training, and a continued discussion with the current Government of Manitoba.
This is, of course, on top of the 150 jobs that Air Canada has agreed to create in Manitoba beginning in 2017.
Senator Plett: Would you take it upon yourself to check with Minister Mihychuk and tell this committee what Minister Mihychuk promised?
Mr. Garneau: I believe that what is important in my testimony to you today is to tell you what the federal government is pledging to do. I believe I'm answering your question on that score.
Senator Eggleton: Thank you, minister, for being here.
My first question is, why are you replacing the cities of Montreal, Winnipeg and Mississauga with the three provinces they're in? You referred to maintenance activities in the bill, and then there's the naming of the provinces, and then the bill says ". . . the Corporation may, while not eliminating those activities in any of the provinces, change the type or volume of any or all of those activities in each of those provinces . . . ." They could virtually wipe out 99 per cent and it would still qualify with that provision in there.
If you're trying to level the playing field with the other airlines, why are you mentioning the provinces at all?
Mr. Garneau: We felt, Senator Eggleton, that this was a reasonable approach to the situation. We wanted to maintain some responsibility whilst not specifying volume and type. We felt that this was a reasonable approach in the circumstances.
Now, for example, in the province of Quebec, maintenance for Air Canada is done in Trois-Rivières, while the original act talked about the Montreal Urban Community, which actually no longer exists. We felt that we should make it broader.
Similarly, the bill is broader in the sense that we have heard from other cities across this country, places like Vancouver, that they would also like to have an opportunity to bid on certain Air Canada contracts.
We felt that in the circumstances, this was a reasonable approach to take in the bill.
Senator Eggleton: If you're trying to level the playing field, when do we remove the strings attached to Air Canada — it's been almost three decades as a private corporation — so that it's on a level playing field with WestJet, Porter and all the rest?
Mr. Garneau: We feel we have a significant amount here with respect to the financial side of the ledger because maintenance is an important part of the costs of airlines. We feel that we have opened that up in the sense that Air Canada can, in fact, also have maintenance performed not only in other provinces but also outside the country. It is in a very difficult, competitive business. As I said, the margins for profit are very tight. We feel that we've struck the right balance with the approach that we've taken here, but it does give Air Canada more flexibility.
With respect to the obligation to have jobs in the three provinces, it doesn't make sense from a business perspective for Air Canada to have fewer than a certain number of jobs in a particular area. This is a big operation. The idea that it might have one or two jobs in one of the provinces doesn't stand up to scrutiny. It has to have a critical mass, because it has a large number of airplanes and it has a large need for maintenance.
Senator Eggleton: You're saying that from a common-sense standpoint?
Mr. Garneau: Yes, and from experience.
Senator Eggleton: Senator Plett will bring a lot of focus on Manitoba, and there's a lot of focus on Quebec as well. We have a letter here from the minister. Where is Ontario in all of this? Why is Ontario not mentioned? What do you foresee in terms of this part of the industry in Ontario?
Mr. Garneau: Ontario is already fairly significant as a centre for aerospace. It would have the second position at the moment. It also did not participate in the litigation when it occurred. Quebec first decided to challenge Air Canada, and Manitoba joined as an intervenor, but Ontario did not.
Senator Eggleton: I take it that has something to do with the fact that Pearson is the major airport of the country, and the amount of maintenance you need there.
Mr. Garneau: I can't speculate, but certainly there's a strong Air Canada presence in the province of Ontario.
Senator Eggleton: The centres of excellence, how do they get started? Who pays for them? This is where you see the jobs coming, the 1,000 in Quebec and 150 in Manitoba.
Mr. Garneau: It's basically a joint thing. Air Canada wants to build the capability in Quebec, which includes the maintenance of the C Series, but there also may be some research and development. There may be linkages with universities, those kinds of things. A similar model on a slightly smaller scale could occur in Manitoba. However, the Manitoba undertaking includes the creation or partial funding of a training college for aerospace employees. There's something that can be done from that point of view, including the 150 jobs in specific areas of maintenance.
Senator Eggleton: Does the federal government take a lead role on that, as well as helping to finance it?
Mr. Garneau: No. The federal government is not directly involved with that part. In a more general way, we have a number of federal programs, as you know, that are managed by my colleague, Minister Bains, in Innovation, Science and Economic Development. Those are focused on the aerospace industry.
Senator Black: Minister, thank you very much for being here, and thank you for your very thorough and deliberate presentation. I appreciate that.
You may or may not know that the Banking, Trade and Commerce Committee of the Senate released a very comprehensive report last week called Tear Down These Walls. It related to our very strong view in the committee that barriers to trade within Canada must be eliminated on an urgent basis.
Given that I sit on that committee, and given that I have a very strong view around the obstacles, you won't be surprised to know that I come at this from the point of view of wondering why there are any restrictions whatsoever in the Air Canada legislation currently. The obstacles can be as much as perhaps $30 billion to $50 billion, as estimated by Minister Bains, in costs to the Canadian economy.
I understand the politics between Quebec and Manitoba. As a senator from Alberta, of course we have a large, important transportation sector there. I think of WestJet and of Air Canada Jazz. If we're going to get into the bad habit of enumerating provinces in Canadian legislation, why would Alberta not be included in this? That is question one.
Question two: Why don't you take this opportunity to eliminate all restrictions on Air Canada so that they can compete globally, which I believe is appropriate?
Mr. Garneau: Thank you very much, Senator Black. I certainly didn't mean to exclude Alberta. As I say, Air Canada can choose to do maintenance in Alberta. The airline industry has a significant presence in Alberta. I've been to WestJet's company headquarters, and it's certainly a company that has done very well. It has never had a negative quarter in its entire history, and they're proud of that. I think that is a significant accomplishment.
In terms of barriers between provinces, I'm certainly very strongly in favour of that. From a transport portfolio, I see some of the challenges which exist in getting a truck from Halifax to Vancouver because of different rules and different requirements across the country. Although they're not trade related, they are trade related for me, because they affect how much can be carried by those trucks which ultimately are going to ports for trade with our country. I certainly support what you're saying there. Let's pull down those barriers wherever we can. That is part of my commitment with the transport ministers of the provinces.
Senator Black: In terms of the question that relates to why did you, in this amendment —
Mr. Garneau: Not get rid of everything?
Senator Black: Why didn't you just throw out the baby with the bathwater?
Mr. Garneau: We felt this was a fairly significant step which primarily addressed the financial bottom line for Air Canada.
[Translation]
Senator Pratte: Mr. Garneau, a few days are left before the summer break. The House of Commons has already adjourned. However, there's a timing issue. The government said it wanted the bill passed before the summer recess. What happens if it isn't passed?
Mr. Garneau: Senator Pratte, I must admit that I personally want the Senate to pass this bill. You're in charge here, of course. However, I believe it would be in Canada's interest to move as quickly as possible, not only for Air Canada's sake, but also for sake of the Quebec and Manitoba governments. That factor is important.
There are also time frames related to the bill, in the sense that Quebec and Manitoba have put the matter on hold ± Sorry. Air Canada decided to wait and extend the period before making a decision on the litigation. We have introduced our bill, and I think it should be passed as soon as possible for the sake of national interest.
Senator Pratte: When I speak with various people regarding the centres of excellence and the resulting jobs or promised jobs, they often bring up the issue of whether they trust Air Canada to create the jobs. Some want agreements to be made with the governments to make sure the jobs will be created. What can you tell people who seem to doubt that 150 jobs can be created in Winnipeg, and eventually up to 1,000 jobs can be created in Quebec?
Mr. Garneau: First, I want to clarify that no agreements exist between the federal government and Air Canada or the Quebec or Manitoba governments. The agreements are between Air Canada and the Quebec and Manitoba governments.
I am convinced the agreements will be honoured. Quebec and Manitoba — at least the former government — based their decision to drop the litigation on the agreements. I think they showed good faith, and I'm sure they'll honour their commitments.
[English]
Senator Mercer: Minister, welcome again to our committee. We're always happy to see you.
You talked earlier about broadening the aerospace industry in Canada, but you didn't bother to broaden that in this bill, you restricted it to Manitoba, Ontario and Quebec. We heard the other day from someone who was talking about the aerospace industry in Prince Edward Island. And as a former resident of Nova Scotia, I know you know that there's a very viable and energetic aerospace industry in Nova Scotia, with companies like IMP and Pratt & Whitney operating in our aerospace park and many others supporting military jobs in the province and, indeed, Jazz has located its maintenance centre in Halifax.
Why wouldn't you take the opportunity of expanding this? I understand the politics of Manitoba and Quebec back when this was done, but that was then and this is now. To quote the Prime Minister, this is 2016, and it seems to me that it's an opportunity. You talked about breaking down provincial borders. Some of my colleagues talked about provincial borders as well. This is an opportunity to expand this.
My major concern is if you're only going to measure things by what's going on in Quebec, Manitoba and Ontario, then there are all kinds of other jobs that could leak away, not just from the provinces involved but from the country, to other areas, to send the aircraft to places where labour is much cheaper to have maintenance done, and then we lose all the benefit.
I don't understand; if we're in favour of breaking down provincial barriers and if we're in favour of broadening the sector, this is the only opportunity we're going to have for years to open this sector for discussion like we're having tonight. Why wouldn't we do it now?
Mr. Garneau: Thank you, Senator Mercer, for your question. I would argue that we have broadened it. I say this because in the original act from 1989 Air Canada had to do all of its maintenance, and I say all of its maintenance, it was required to do it, in three cities. Today, with the modifications that we are proposing through Bill C-10, Air Canada, yes, has obligations in three specific provinces, and part of this is historical in nature, but it is also very clear that it is not constrained to those three provinces. It can do maintenance. I know IMP and I know Pratt & Whitney. I've been to both in Nova Scotia. I was industry critic previously, and I've always had a special interest in the aerospace sector to begin with. However, I would say that Air Canada is now in a position where if it feels that the best company to do a particular area of maintenance is in the Atlantic portion of Canada, it does have freedom to do that. In that sense, I believe that the bill is broader than the original act.
Senator Mercer: We're going to measure three provinces, including Ontario, Quebec and Manitoba, in terms of the legislation to do that, but what about maintenance moving offshore — offshore meaning Mexico, Chile and even Israel as places for aircraft maintenance. How do we measure that? How do we protect ourselves against exporting those very good-paying, high-tech jobs out of the country?
Mr. Garneau: The act, as we propose it, does not prevent Air Canada from doing some of those jobs offshore; that's correct. Nor does it say anything about where WestJet decides to do its offshore maintenance, if it chooses to do so, or Porter or any other airline. There are pressures on a company like Air Canada, with, as I say, about 30,000 employees, to remain viable and to continue to grow. It is one of the large airlines of the world. It has a good future ahead of it if it plays its cards properly. But an important factor in terms of how it plays its cards is that it has to compete against all those other airlines, not just the Canadian ones but the international ones. We felt, as a new government, that if we imposed too many restrictions on where it does all of its maintenance, we would be tying its hands behind its back.
Now, there is a lot of expertise in this country in the aerospace sector. We want to continue to build it. I think funding Red River College in Manitoba is going to provide a new pool of very skilled people working in the aerospace sector, and that will continue to build our capability because we want to be strong in this field and we want to continue to grow it compared to other countries. It's an extremely competitive field, so we felt that we needed to allow Air Canada more flexibility, senator.
Senator Mercer: You used the words "new government" a moment ago. "New government" would conjure up ideas of new ideas, new thoughts and new action. What we've got here is old action with the same three provinces being listed. I don't see a lot of imagination here, and I'm very concerned about maintenance being moved offshore. I'm concerned about it for the other airlines as well, for WestJet, et cetera, because this is a big business. I wouldn't be upset if a bill came before us that said airlines of a certain size in the country would be restricted from taking the benefits they receive from the system that the people of Canada put in place, that one of their commitments back to Canadians is to have the maintenance of those airlines take place in Canada. As I say, I'm not restricting my comments to Air Canada. I think it's probably worthwhile.
I have one final question on the issue of language and the restriction that was put on Air Canada back in 1989 to provide services in both official languages. This restriction has not been placed on the other players. Isn't it time that we put that restriction on all players of a certain size? Shouldn't Canadians who speak either language who get on a WestJet or a Porter flight or any other airline that may grow to that size be able to expect to be served in the language of their choice?
Mr. Garneau: It's an interesting question. It goes a little bit beyond what we're talking about today, except in the sense that Air Canada is the only airline that is required to offer services in both official languages because that was put in as a carry-over from when it was a Crown corporation and became a private entity.
Certainly since Commissioner Fraser handed out his report card, I guess about a week ago, I've heard people raise those issues. I've heard a variety of opinions being expressed. I will only say at this point that, by law, Air Canada is required to conform itself with it. The discussion about whether there should be a uniform standard for all of the airlines is an interesting question that has been raised, but it is not one that we have had the chance to look at and that we are thinking about at this particular time, although things could evolve.
Senator Unger: Thank you, minister, for your information. I'm also from Alberta. I've learned a lot about the workings of Air Canada, some of which I remember and never knew the reasons.
But my question to you concerns the following: In the testimony to the House of Commons Transport Committee in May of this year, the Association of Former Workers of the Air Canada Overhaul Centres made the allegation that in the past four years, 355 of Air Canada's aircraft have been illegally repaired in foreign countries, including the United States, Israel, Singapore, Japan and others. They also said that during the Aveos years, Air Canada proved that it was willing to outsource this work to other countries.
I have two or three questions about this. Can you tell me, while I think it's agreed that they have been outsourcing already, that's been a past practice?
Mr. Garneau: There's no question that Air Canada has had some of the maintenance on some of its aircraft parts done in other countries, yes. I don't know the specific figures.
I think you're referring to something from the machinists' union.
Senator Unger: Yes.
Mr. Garneau: Yes. I would have to check about specific figures and what components we're talking about here, but I do acknowledge that Air Canada has done some of its maintenance offshore, yes.
Senator Unger: Since the information is accurate, does that not mean that Air Canada was in violation of the ACPPA? If they were in violation, why are they getting a free pass? Shouldn't there be some penalty?
Mr. Garneau: I don't know, historically, before Aveos declared bankruptcy, what the situation was with respect to offshore sourcing. I know that when Aveos closed its doors, there was an impact to 2,600 employees. I think about 1,800 of them worked in Quebec, about 400 in Manitoba and the rest in Ontario. That is probably the reason that Quebec and Manitoba decided to go to court with Air Canada.
But they have recently indicated that they are prepared to let that go in return for agreements that will create jobs for Quebecers and Manitobans in the aerospace sector. I am presuming, because I'm not party to those agreements, that Quebec and Manitoba are satisfied that there is a resolution to what was a long period of litigation.
Senator Unger: I just have one more question. I agree that Air Canada is now a private corporation, so I don't know why, as other senators have stated, they are still bound by some components of an original agreement.
Also, with regard to kicking down the boundaries between provinces, surely it would help Air Canada's bottom line if the work could go back and forth between provinces.
Mr. Garneau: Yes, senator, it can go between provinces, because the way it's written now, it can be done in any one of the 10 provinces. But there is a requirement that in three of the provinces, Air Canada maintenance must be done. As I say, the undertakings that have been reported here today concerning centres of excellence and the creation of jobs — those for Manitoba and Quebec are agreements that, I believe, are in place now, but it does not prevent Air Canada from having the maintenance on some parts or equipment done in Alberta, British Columbia or Nova Scotia.
The Deputy Chair: I ask that senators try remain at one question each.
Senator Plett: Minister, you were quite emphatic that the previous government had agreed to a deal or had agreed to cooperation; I'm not sure what the wording was. But it was with the previous government, and it was done because they had certain commitments.
This new government is saying exactly the same thing: They want to do this deal and support this deal as long as those commitments are honoured. We're going to have the minister, deputy premier and Minister Cullen here on the next panel, and these questions will be posed to them.
Clearly, commitments were made. Nobody is denying those. The deal offered to Manitoba does not honour those commitments. So I ask you again, minister, to please ask Minister Mihychuk and send us a written response as to what promise Minister Mihychuk made to Manitoba, because that is all they're asking for. They're not asking for $10 million, $20 million, $30 million or $40 million; they're asking for the commitment to be honoured.
Chair, I ask that we either get a written response from Minister Mihychuk, or maybe we need to have another committee meeting and get her in here to find out what she promised to Manitoba.
Senator Black: Minister, I'd like your opinion on two matters, if you would, please. I'm sure you'll agree with everyone in this room that Canada is a trading nation.
Mr. Garneau: Yes.
Senator Black: I'm wondering if you have any view as to what signal would be sent to Canadian business and, more broadly, to international business and investors in Canada if we were not to pass this legislation.
Mr. Garneau: Are you talking about within a certain time frame or not at all?
Senator Black: As Senator Pratte has indicated, we have two days of school left, so my own view is that we need to get it done. We're a trading nation, and we need to get it done. I want to hear your view. You are the minister.
Mr. Garneau: I would say what I have said on many occasions in the House of Commons: There two reasons why we wanted to proceed with this bill. We wanted to put an end to continued litigation, and therefore we sought clarity with a new position. But second — and I think I emphasized this in my opening remarks — we do believe in allowing our businesses in this country, as much as possible, to operate on a level playing field in a competitive environment, and this is an extremely competitive environment.
So I think that we're sending a very clear signal that we believe in free enterprise and in providing the same rules for all competitors within the same field, so that they can compete, with none of them being disadvantaged. I think that's an important signal to send to the business community in this country.
Senator Black: Would you believe that as we continue to develop this important part of the Canadian economy, other airlines would then start to access the capacities we have in Canada for airline repair?
Mr. Garneau: It's certainly a possibility. If one looks at the capability that we have in this country in certain areas where we're the best, there are foreign countries that — I'll give you an example. There's a company at Mirabel called L-3 MAS. L-3 MAS does the maintenance on the CF-18s. I'm not trying to open up a new subject here, but because we insisted on building up the capability of a Canadian company in doing the maintenance of the CF-18s 30 or more years ago, that company also does the maintenance of the Australian F-18s. So, yes, in some cases, that is one example that comes to mind, but I'm sure there are other examples where Canadian companies that do maintenance certainly have the capability and do some maintenance, although I don't have the information at my fingertips.
Senator Lankin: I just came from a meeting with the machinists and had an opportunity to ask them some questions about what it was they were really looking for, because they completely agree, Mr. Minister, that time has moved on. They believe in their company being competitive and believe that we are a trading nation. But they have a very strong and, I think, compelling point of view to put across that after the bankruptcy of Aveos, they had three successive collective agreements in which they gave concessions and created a competitive field and where Air Canada has continued to earn very significant profits during that period of time. There hasn't been much of a commitment back.
In this legislation — even though the old number of jobs commitment wasn't being lived up to, and we all recognize that, and the heavy maintenance has disappeared and a lot of the line maintenance is being done in U.S. centres by fellow unionists and under the same cost structures — they have a real sense that there isn't anything coming back in terms of a commitment of ongoing skilled employment. That affects this generation and next generations in regional economies.
They've tried but haven't had a chance to meet with you, and they haven't sat down with the company. No one wants to engage with them to make them part of the solution for finding the business case to go forward. Can you help create those conditions? I think we want to keep jobs in Canada if we can.
Mr. Garneau: It's always a good thing to keep jobs in Canada, and to build jobs, and I did mention in my opening remarks that the maintenance industry actually grew in the 10 years between 2004 and 2014, by 37 per cent. I think if one looks at the broad spectrum of maintenance of aircraft and aeronautical parts in this country, it has actually grown.
I actually met with David Chartrand, who is the representative for the machinists for the province of Quebec, and I have all of his material, so I know his position. Yes, it's regrettable that people did lose their jobs. It's always regrettable when anyone loses their job, but I think we are going to move towards a period of rebuilding of some of those jobs and, I hope, all of those jobs. I'm not saying that will happen for the specific people, but in the specific areas through the agreements that Air Canada has agreed to have with Quebec and with Manitoba.
I think we are going to build, and I can tell you that our government is committed to building the aerospace industry, and we're committed to building training in the aerospace sector. I think better times are ahead, but I think we need, in all of that, to recognize that Air Canada also has to be able to compete in its own very competitive field.
The Deputy Chair: Thank you, Mr. Garneau, and to your officials for participating in the hearing today.
I want to introduce our next witnesses. From the Government of Manitoba, we have the Honourable Heather Stefanson, M.L.A., Deputy Premier and Minister of Justice and Attorney General; and the Honourable Cliff Cullen, Minister of Growth, Enterprise and Trade. And from the Manitoba Federation of Labour, we have Kevin Rebeck, President.
Ministers Stefanson and Cullen will be sharing their speaking time, and then we shall hear from Mr. Rebeck. After these presentations, the senators will have questions.
Hon. Heather Stefanson, M.L.A., Deputy Premier and Minister of Justice and Attorney General, Government of Manitoba: I will ask my colleague, the Minister of Growth, Enterprise and Trade, to start.
Hon. Cliff Cullen, M.L.A., Minister of Growth, Enterprise and Trade, Government of Manitoba: Good afternoon, members of the committee. Let me begin by saying that Manitoba's aerospace sector is a world-class industry. It employs approximately 5,400 people directly and contributes millions of dollars to our local economy.
The largest aerospace presence in Western Canada, Manitoba's industry is recognized for the high-value, challenging jobs it supports, and Manitoba companies are at the forefront in making significant annual investments in capital, research and development.
Our firms are diverse and on the cutting edge of innovation, and the outlook for Manitoba aerospace is positive. Manitoba companies like Magellan and Boeing, and unique Manitoba facilities like the Composites Innovation Centre, are often the first to implement advanced manufacturing processes and materials.
Nonetheless, the global supply chain is extremely competitive, and Manitoba companies face severe competition from lower-cost jurisdictions. The loss of high-quality skilled jobs that resulted from the closure of Aveos in 2012 is still very much felt in our province.
Manitoba's interests are clear: economic growth, high-quality jobs and a strong and competitive aerospace industry.
The responsibility of our new government is to ensure Manitoba's aerospace industry emerges strengthened, not weakened, by decisions made at the federal government level. It is healthy for our country to maintain a robust and competitive aerospace industry outside of Eastern Canada. As a new government, we need to be sure Manitoba will be given the consideration it is due if changes to the Air Canada Public Participation Act are being sought. Maintaining a strong aerospace presence in Western Canada is in the national interest.
Actions taken by the federal government can have an enormous impact on the sustainability of Manitoba's aerospace sector. One the most notorious was the CF-18 contract. These types of conflicts serve no one's interests and can be avoided through a proactive partnership. Our government will continue to engage with our partners in the federal government and Air Canada as well as local stakeholders regarding the implications of Bill C-10.
There are significant implications to moving forward with Bill C-10, and it is not appropriate to rush through without substantial dialogue and consideration. Manitoba stands unanimous in this position, having received all-party, unanimous support for a motion on this matter in our legislature.
I thank the members of the committee for their time.
Ms. Stefanson: As my colleague just stated, actions taken by the federal government can have an enormous impact on the sustainability of Manitoba's aerospace sector.
In February 2016, the previous Manitoba government wrote Minister Garneau requesting that amendments to the Air Canada Public Participation Act be limited to expanding the geographical scope of Air Canada's commitments within Manitoba. The proposed amendment in Bill C-10, however, goes significantly further than the geographical scope. The spirit and original intent of the legislation was to ensure that skilled, heavy maintenance work remained in Manitoba. While some flexibility can be appropriate, the proposed amendments virtually eliminate any obligation for the company to maintain high-quality, skilled, heavy maintenance jobs in our province; and this is contrary to the interests of Manitobans.
The aviation industry has evolved substantially since the privatization of Air Canada and the introduction of the Air Canada Public Participation Act. Competitiveness is an integral part of economic growth. We embrace change, but it is the responsibility of our new government to ensure that Manitoba's aerospace industry emerges strengthened, not weakened as a global competitor.
It is not appropriate to rush through amendments to the act without substantial dialogue and consideration as these amendments virtually eliminate any obligation for Air Canada to maintain high-quality, skilled, heavy maintenance jobs in our province. Manitoba's new government has been engaged with our aerospace sector, federal partners and Air Canada on this issue. We have been clear that our government opposes federal amendments to the Air Canada Public Participation Act. We will continue to oppose until such time as specific commitments have been made by the federal government to reassure Manitobans that changes to the act and related accompanying investments and job creation will provide a net benefit to the Manitoba economy.
We are supported in this position by an all-party unanimous motion passed in the Manitoba legislature recently. Manitoba understands the need for modernization of the act, but that need is matched by our need to have commitments in place to ensure the protection of Manitoba's aerospace sector and our economy. We continue to engage with our partners at Air Canada. Those discussions to date have been productive. We remain disappointed with the lack of engagement and follow-through by federal government MPs from Manitoba. In recent weeks, our premier met with the Prime Minister and indicated that Manitoba would continue to push for a commitment from the federal government to ensure the ongoing strength of Manitoba's aerospace sector.
The Prime Minister and the premier agreed with respect to the importance of maintaining a strong aerospace industry in Manitoba. In recent days, our government has been contacted by members of the Manitoba business and aerospace communities who are concerned with the implications of Bill C-10 but are growing increasingly troubled by a potential decision by the federal government to purchase an aircraft other than the F-35.
Industry representatives and our government are concerned that these developments will undermine the significant efforts and investments that both the provincial and the federal government have made in this industry with the goal of positioning Manitoba to capitalize on global opportunities. In the past, the industry suffered heavy losses when defence projects were cancelled after significant capital investments had been made in both human resources and equipment.
One of the most notorious was the CF-18 contract. These types of conflicts serve no one's interest and can be avoided through proactive partnership. Manitobans are concerned that the federal government is proceeding in a way that favours other regions' interests over those of Manitoba. Manitoba should not be expected to settle for less than its fair share.
We remain hopeful that the federal government will use this opportunity to demonstrate their stated commitment to the long-term economic viability of the industry with real, concrete actions. Until such time as specific commitments have been made to reassure Manitobans that changes to the act and related accompanying investments and job creation will provide a net benefit to the Manitoba economy, our opposition will continue.
Thank you.
The Deputy Chair: Mr. Rebeck, I invite you to make your presentation.
Kevin Rebeck, President, Manitoba Federation of Labour): Thank you for the opportunity to speak to the Senate committee about Bill C-10.
I was pleased to speak to the House of Commons Standing Committee on Transport, Infrastructure and Communities back in May this year on the bill. At that time, I called for Bill C-10 to be rejected as it is resoundingly bad for jobs and economic growth in Manitoba. The Government of Manitoba, represented by Deputy Premier Heather Stefanson, made a critical presentation on the bill that same day.
Subsequent to the standing committee's deliberations, the Manitoba legislature passed a unanimous resolution in opposition to Bill C-10. In addition, Manitoba's business community has also come out in opposition to the bill. It's my sincere hope that the Senate committee will hear the united call from government workers and businesses in Manitoba to reject Bill C-10.
Historically, Air Canada has been a significant employer and generator of economic activity in Winnipeg and Manitoba more broadly. In recent years, however, we felt the serious adverse effects of Air Canada scaling back its operations and moving, eliminating a large number of jobs from our city. Air Canada has cut the number of flight attendants, pilots, finance positions and call centre jobs from Winnipeg. Of course, most recently we felt the huge loss of 400 high-quality jobs following the 2012 closure of the Aveos aircraft maintenance operation in Winnipeg, including some 350 members of the International Association of Machinists and Aerospace Workers.
Air Canada's total employment in Manitoba has dropped from nearly 2,400 in 2002 to fewer than 800 today — a reduction of about two thirds. The bill under consideration today deals most directly with overhaul and maintenance jobs and specifically proposes to relax existing requirements on Air Canada to maintain jobs, a requirement that the corporation has disregarded and failed to honour. The term "relaxed requirements" doesn't accurately capture what the bill proposes to do. The amendments before you obliterate Air Canada's obligations to keep good jobs in Winnipeg, rendering them toothless and unenforceable.
The elimination of heavy maintenance operations in Winnipeg, which occurred with the collapse of Aveos, is in direct violation of the existing 1988 ACPPA, which explicitly mandates Air Canada to maintain an operational and overhaul centre in Winnipeg as well as in Montreal and Mississauga.
We know that Air Canada's actions violate the current act because the act is clear, precise and specific. We also know this to be true because the Quebec Superior Court has told us so. In response to a suit filed by Quebec in April 2012 and later joined by Manitoba, the Quebec Superior Court ruled that Air Canada was in contravention of the act because it had not maintained required heavy maintenance operations. When Air Canada appealed the ruling, the Quebec Appeals Court ruled against the corporation.
It has been disappointing that the Government of Canada has thus far refused to enforce its own legislation. This has been even more difficult to rationalize since the Quebec court ruling against Air Canada.
The act, which privatized Air Canada, intentionally and specifically included requirements to ensure the maintenance of high-skilled, high-tech, well-paying jobs in Winnipeg and other Canadian centres.
This didn't happen by accident. It happened in response to concerns raised by labour, impacted communities and local and provincial governments at the time about the potential and likelihood of job loss, concerns which have proven to be right on the mark.
The federal government of the day told us not to worry. Canada said jobs would be preserved and maybe even grow. Similar concerns were raised again after the Air Canada-Canadian Airlines merger and after the spinoff of what would become known as Aveos. Again, we were told there is nothing to worry about because the act guaranteed that jobs would be maintained, but that hasn't happened. The closure of Aveos has cost our community 400 good jobs, and Canada has failed to hold Air Canada to account and enforce the law.
Instead, the federal government seems to have entered into secret negotiations with Air Canada, resulting in Bill C- 10, which removes all substantive requirements for Air Canada to do its work in Winnipeg and other parts of Canada.
Clause 1(2) of the act allows Air Canada to change the type or volume of any of its maintenance work and change the level of employment in those activities. This amounts to a total and complete gutting of the current job and operation requirement in the act.
Now, Air Canada tells us they're working to establish a so-called centre of excellence in Winnipeg. In mid-March this year, the corporation announced that it had concluded a deal with Manitoba, a deal that was said to take the form of an MOU and that is supposed to create about 150 jobs in Winnipeg, through the establishment of three Air Canada supplier operations. However, few details and few specifics are known about the deal, as the MOU has been kept secret and not been publicly available.
I should say that no mention was ever made about legislative changes as part of the announced deal.
So we're left with few answers and many questions. First, we don't know if Air Canada is truly obliged to create 150 jobs or has simply agreed to try its best. Is 150 a firm number? Are these jobs guaranteed?
Second, how long must Air Canada maintain these jobs? Could they be cut or eliminated in a year, two, three? What does the MOU say about timelines and permanency?
Third, we understand from informal reports that Air Canada has been given until the end of June to live up to whatever obligations they have agreed to in their MOU. Can the federal government confirm this time frame? If it is indeed the case, then why is the federal government proposing to change the legislation now, before it can verify that Air Canada is actually going to follow through? Why was time allocation used to rush through relief for Air Canada from its existing obligations, obligations that the corporation has refused to live up to for years, before we even know whether Air Canada is prepared to honour its new, secret pledges?
These are questions that Manitobans deserve answers to. On behalf of the Manitoba Federation of Labour, I urge this Senate committee to reject this bill and to recommend to government that the existing Air Canada Public Participation Act be honoured and enforced.
The Deputy Chair: Thank you, Mr. Rebeck, for your presentation. We will now go to questions from the senators. The first question for our witnesses will be from Senator Plett.
Senator Plett: Thank you, Ministers Stefanson and Cullen and Mr. Rebeck, for being here this evening. We appreciate that. I certainly want to echo what all three of you have said, that there needs to be a net benefit here for the province of Manitoba if we want to move forward with what I would consider, at least, a bit of a suspect bill, partly with regard to timing.
I'm going to ask Mr. Rebeck the first question, and then I want to ask both ministers a couple of questions.
Mr. Rebeck, two really quick questions: Who was Aveos's biggest customer?
Mr. Rebeck: I believe Air Canada was Aveos's biggest customer.
Senator Plett: I believe you are right, and probably the failure of Aveos could have some connection to that fact.
You talked about the centre of excellence and creating 150 jobs and whether, in fact, that was a guarantee. The release that I'm reading from says, "The Centre is expected to create 150 jobs starting in 2017 . . . ." Expected to. It does not say it will create 150 jobs. It's expected to. You're right. When the bill says, ". . . the Corporation may, while not eliminating those activities in any of those provinces, change the type or volume of any or all of those activities in each of those provinces, as well as the level of employment in any or all of those activities," does that give you a degree of comfort, Mr. Rebeck?
Mr. Rebeck: It gives me no comfort whatsoever. There is no language there that lets them adhere to the promises that were made and the obligations that they need to live up to.
Senator Plett: Minister Stefanson, you have been quite clear from the start, and I applaud you for getting unanimous consent on your motion. I wish the Manitoba Liberal MPs were wanting to help Manitoba as much as the Liberal MLAs there are. It is unfortunate.
Let me ask you this: There has been some talk about certain commitments that were made in the last provincial election by a cabinet minister from Manitoba, MaryAnn Mihychuk, and there was an article in the Free Press on the weekend with a very bad photo of me. I take exception to that, but I'll deal with the reporter on that later. Nevertheless, the article was quite correct, and at the end of the article, it says she tried getting hold of Minister Mihychuk to get some very clear direction as to what she had said. She got a written response from her office basically saying that she supports all of Western Canada and, indeed, Manitoba. That was the extent of her answer when she was asked about an explicit promise.
I asked the Minister of Transport today what that promise was, and, for the life of me, I can't understand that. Everybody has lost Minister Mihychuk's phone number, and nobody can call her to ask her what commitment she made. So nobody is.
Can you elaborate a little bit on what you believe Manitoba should get out of this insofar as Minister Garneau said that they were giving Red River College $10 million for some training? That's nothing to be sneezed at, but can you tell us, Minister Stefanson, what you would like to see?
Ms. Stefanson: I want to thank you, senator, for your question. I think it's an important one, and from the beginning we've been very clear on this, that we need to ensure that there's a net economic benefit to Manitoba.
This bill was brought forward by the federal Liberals. We have had discussions with Minister Mihychuk and Minister Carr on this very issue, and we have yet to receive any indication that that net economic benefit is going to be fulfilled. That's why it's very important when we're talking about this. I understand that there are some discussions between officials now, but there has been no indication to date that there is a net economic benefit on the table for Manitoba. That's why we will continue until such time as we get that indication from the federal government. That's why we encourage senators to stop the passage of this bill to allow that dialogue to take place. It's the exact reason why we shouldn't be passing this bill until such time as reassurances are given to Manitobans that there will be a net economic benefit.
Senator Plett: Thank you to both of you. Maybe you can write to someone, by email or pen, here in Ottawa with Minister Mihychuk's phone number so that they can call her and have that same dialogue. Thank you.
Senator Black: Ministers and witness, thank you very much for your very comprehensive presentation, and thank you for your very appropriate and spirited support of your province. This is natural. Congratulations to your new government.
However, I, of course, have a little bit of trouble with what you would have us do. I understand from what you're suggesting that you would have us pause on this bill, to the prejudice of Air Canada and, arguably, to the prejudice of the other two named provinces. I'm quick to add that I represent a province not named in the legislation who arguably could take the position that we have no net economic gain from this legislation as well.
You would have us hold this matter up while you continue to discuss your entitlements — you call them net economic benefits — between yourselves and Ottawa. As the Senate of Canada, do you believe that's in any way appropriate?
Ms. Stefanson: That's addressed to me, I assume?
Senator Black: It will be to one of the ministers, yes.
Ms. Stefanson: Thank you very much, senator, for that. It is our job, as a newly elected government representing the people of Manitoba, to represent them in the best way we can and see fit, and that is exactly why we are standing here before the committee today. That's exactly why I presented, along with Mr. Rebeck, at the last committee hearing, as well, in the House of Commons.
It's very important that we stand up for Manitobans. That's our job. We will continue to do so, for Manitobans. There was never any indication prior to this that legislation was going to be brought forward in this manner, but it has, and now we need to stand up for Manitobans. That is why we are doing so. I'll remind the senator that it was an all- party committee in the legislature that supported this. This is not about politics. This is about standing up for the best interests of Manitobans.
Senator Black: I understand that completely and I respect, as an elected senator in this chamber, that you have your constituency and you need to advocate strongly on behalf of your constituency, and you're doing just that.
But you, of course, understand that there are other interests at play, and it could be suggested that to use Air Canada as a bargaining chip in the midst of this conversation may or may not be appropriate. But we can agree to disagree on that.
One other question that I have relates to the status of the aerospace industry in Manitoba today. I am interested in your comments as to why the industry has been unable — if you have been unable — to attract other customers: the Deltas, the Uniteds and the Qantases of the world. There are 300 or 400 airlines in the world. Why is this industry so keen to rely on this protection that you're arguing we should extend to you, and yet you've been unable to develop it in the private sector, using private sector rules?
Mr. Cullen: Thank you very much, senator. I appreciate the question. As you know, we are a new government. We've been in office for seven weeks now. I can assure you my portfolio is impacted with trying to grow our economy here in Manitoba. We are just starting the dialogue with a lot of different companies around the world, and we certainly hope to attract business to Manitoba.
The aerospace industry is very important to Manitoba. As I mentioned, we have 5,400 direct jobs here and we have other industries that are directly related to the aerospace industry in the province and there's a tremendous amount of research going on in Manitoba with regard to the aerospace industry.
We have a very good, innovative group of companies here working directly with the aerospace industry, and we think there are a lot of synergies in Manitoba for the industry. We are signaling, as a new government, that we are open for business and we want to attract business here in Manitoba. That's certainly our mandate given to us by our premier, and we will be doing everything we can to attract business and investment to Manitoba.
Our doors are open, and we are going to be going out and about trying to open some other doors to attract further investment here in Manitoba. We do know that we have assets here in terms of buildings, and we also have assets here in terms of labour. We look forward to having discussions with companies where these assets, both on the building side and the labour side, can be best utilized.
Senator Pratte: This question is directed to the ministers. You want to ensure a net economic benefit to Manitoba. Wouldn't the opening of a maintenance centre of excellence, with the creation of at least 150 high-skilled jobs in Winnipeg, qualify as a net economic benefit for Manitoba?
Ms. Stefanson: I think the important thing to remember here is that prior to this, we were not aware that legislation was going to be brought forward at all. We are in very good discussions with Air Canada, but those are separate and apart from this. This is a bill that is before Parliament, where there has been, at one point in time, an indication that there is a net benefit to Manitobans by an agreement between a previous federal Liberal minister, as well as the previous government. We just want to ensure that that net economic benefit is adhered to, and that's why we're here before the committee today. Right now we have been given no indication by the federal Liberals that they plan on living up to those commitments that were made prior to us becoming part of this government.
Senator Pratte: Are you not concerned that if Bill C-10 is not passed before the summer recess and before the end of the delay of the decision of the Supreme Court for the permission to appeal for Air Canada, that would threaten the creation of centres of excellence in Winnipeg and Montreal, and therefore the 150 jobs in Winnipeg and the 1,000 jobs in Montreal might simply disappear?
Ms. Stefanson: I appreciate the question, senator, and I know you and I have had a discussion about this. I will tell you that the way the act is written right now, there is no guarantee that those jobs will remain in Manitoba at any time. That is our main concern here. Until we are assured by the federal Liberals, who have introduced this bill, that there is a net economic benefit to Manitoba, we will continue to oppose this. As it stands right now, we don't see anything before us that indicates that that is the case.
Senator Pratte: I understand your point of view, but, with respect, I think your strategy is a very high-risk one. Thank you very much.
Senator Eggleton: Following up on the questions asked by Senator Black and Senator Pratte, I'm having a little difficulty coming to grips with why we're using a legislative tool on a private sector corporation that's in competition with other private sector corporations, like WestJet, where there's no requirement of those other corporations, but there would be a requirement of this one. They're arguing it's been almost three decades that they've been a private corporation. I know their history is as a Crown corporation, but they're now a private sector corporation and they have to complete with these other airlines in Canada and internationally.
I can understand that governments do provide incentives for creating jobs, but this is a legislative tool. Bill C-10 is a legislative requirement with respect to changing the three cities to three provinces. But if we were going to have this kind of bill to still force this on Air Canada, wouldn't it be better to say "Canada," rather than "three provinces" to allow for the competition to go wherever it can within the country? If we had any provision for this at all in legislation, wouldn't it be better to just say "Canada?"
Ms. Stefanson: The Air Canada Public Participation Act originally came into force back in the late 1980s. It was as a result of what took place at the time to ensure that there were jobs in Manitoba. So this goes way back in history.
We have no problem with taking steps which partially modernize that act. We agree with that, in fact. Certainly we have no problems with the changes in geographical scope. We do take issue with the fact that there was an act originally before Parliament many years ago that brought jobs to Manitoba, and right now this act takes any guarantee of those jobs away, without any sort of indication at all from the federal government of compensation or net economic benefit for Manitoba. For us, as the newly elected Government of Manitoba, we don't believe that's in the best interest of Manitobans.
Mr. Rebeck: Yes, we have huge concerns with that. This act was formed when Air Canada moved from a Crown corporation to a private entity. It came in that deal when they got the assets of a Crown corporation. There were some strings attached. Those strings attached were to provide good Canadian jobs and keep them in Canada. They picked some geographic regions. I wasn't at the table at that time, so I'm not exactly sure how we were chosen, but we were, our province in particular. It was promised that we would maintain good Canadian jobs. It was part of the deal.
I'm not surprised that the board of Air Canada today is asking government to be released from those deals We don't want to live up to those obligations any longer. That's a fair argument for a board to make. However, for people representing Canadians, that's not a fair request. The deal when they got to become a private entity was that they would live up to the agreement to keep good jobs in Canada in specific regions. That work is still required. It's not like we've evolved to the point where the planes are repairing themselves. It still has to be done somewhere. They want to be relieved of providing good Canadian jobs. That's wrong, and that's why we take great opposition to this. There needs to be that.
They are not putting the centres for excellence in the legislation. They're not saying we want to replace them with centres of excellence and provide good jobs. They're kind of dangling that on the side and distracting us by blending that in. We want this, and maybe this might be something we may do that may balance some of it. That's BS. A deal was made and commitments and obligations that quite frankly haven't been lived up to, and they need to be.
Senator Lankin: Thank you very much. To the ministers, as I'm listening to you, I hear that you're having discussions with Air Canada. I am wondering what kind of discussions those are with respect to the centre of excellence and what kind of assurances they have or have not given to you. What kind of timelines are they committing to or not committing to?
Secondly, your insistence on the net economic benefit is directed towards your discussions with the federal government. Do I take it from that that you're looking for an economic commitment that may not involve the actual Air Canada jobs and the machinist jobs we've been talking about, that there are alternatives that you're maybe discussing? I'm a bit confused about what your actual demand is of both Air Canada and the federal government.
Ms. Stefanson: I want to thank the senator for the question. It is an important one. Bill C-10 has come about as a result of the federal Liberal government introducing this. Again, we don't have any problem with the modernization of the act, with the change of the scope or the change in the geographical scope. But what we do have a problem with is that this does not have a net economic benefit for Manitobans. You've heard us say that.
What we're looking for is to ensure that does take place. We have heard nothing from the federal government to assure Manitobans that will take place. This act no longer requires Air Canada to supply those 400 jobs in Manitoba. When you take something away as a result of legislation introduced, it's only fair to ensure that there's a net economic benefit to that province. It's just fairness that we're asking for. We're not asking for anything beyond that. We want to develop a good relationship, as partners with the federal government. We are looking forward to that. Right now we're not getting those assurances from the federal government.
Senator Lankin: If I may, a supplementary.
So if the federal government were to commit to some kind of economic investment program in partnership with you that may not include unionized jobs for machinists in the aircraft maintenance industry, am I correct to understand that it could be something entirely different that you would potentially look at and consider?
Ms. Stefanson: Yes. We're looking for further training and jobs for Manitoba that again will supply that net economic benefit for us. That's exactly what we are looking for. I don't know if you want to add anything to that, minister?
Mr. Cullen: We firmly believe there's opportunity for further development in the aerospace business here in Manitoba. We'd certainly like to see a commitment from the federal government on that side. We're certainly prepared to be at the table to discuss options, certainly in the aerospace business and outside of the aerospace business. We think we've got a lot of optimism in the economic environment here in Manitoba.
We're willing to be at the table with the Liberal government. It would be nice to have an open, honest discussion about what those opportunities might look like. Up to this point in time, we haven't had that. That's why we, as a government, are frustrated. Certainly from Mr. Rebeck's position, he's obviously very frustrated. That's where we are in this discussion. We've had a lack of discussion with the current federal government.
Senator Greene: Thank you very much. Isn't it reasonable to say that all this legislation does is confirm reality? It allows to happen legally, I suppose, what is happening anyway and what has to continue to happen if Air Canada is to be a competitive airline around the world.
Ms. Stefanson: Again, we have no problem with parts of this act, the modernization of it or the geographical scope. But when there is a specific area that takes away something which has been entrenched in legislation at the federal level since the late 1980s, we know, of course, that there needs to be some modernization to that act. But at the same time, there is something that was in place in Manitoba that is no longer going to be the case as a result of the passage of Bill C-10. That's why we wanted to slow down the passage of this bill until such time as we're reassured as Manitobans that there's been a net economic benefit to us. Right now we have not been assured of that.
Senator Pratte: I think Mr. Rebeck wanted to add something.
The Deputy Chair: I'm sorry. Mr. Rebeck, please feel free.
Mr. Rebeck: They're all interesting questions, but at the end of the day, the interests of Canadians are that they had a deal that was struck when they privatized a Crown corporation — namely, that there would be obligations to create good Canadian jobs. We're throwing away those obligations. We're not living up to providing that service to Canadians. We're relaxing that to the point that it's not a requirement at all.
I would argue strongly for respecting, if a geographic area had some deal and commitment, that it should be honoured. Even more broadly, Canadians have an expectation that those who represent and serve us look out for our interests, and this bill does nothing for Canadians. This bill only advances the requests of what used to be a Crown corporation and had a deal in place to say, "Let's forget about that deal now, and let us go about and do our business." That doesn't do anything for Canadians.
We want to protect jobs. We want to keep them as good Canadian jobs. There were commitments to regions that they have ignored, and we want them to live up to them.
I think those are reasonable expectations for us to call on, because that was the deal.
Senator Unger: Minister, when did your government first become aware of Bill C-10? What's the timeline?
A supplementary to that: Do you feel that negotiations in good faith are happening, or is it just some promises that may or may not happen?
Ms. Stefanson: Thank you for your question. It is a very good one. We were made aware of this right away — as soon as we took over government. As you know, we've only been in for — I think it's been seven weeks now. As soon as we were made aware, I know there was a deadline for presentations at the committee that was pretty much just a couple of days later, and we felt it was very important to make this presentation very early on in our mandate — as soon as we possibly could. That's why Mr. Rebeck and I did a presentation before the standing committee in the House of Commons on this, and it's why we're back here again, several weeks later.
Very little dialogue has taken place. As I understand, there might be some taking place now, and that's a good thing. We want to develop a good relationship with the federal government moving forward, as far as its concern goes of ensuring a net economic benefit for Manitoba. That's what Manitobans elected us for, and we're here before the committee to ensure that does take place.
It's still my hope that will happen prior to this bill being passed. I'm hoping that there is some time for that to take place. I am concerned that there has been very little dialogue — not without us trying to have a dialogue on this and trying to ensure that net economic benefit for Manitobans, but we just haven't had that reciprocal discussion with the federal government, and that is concerning to us.
We look forward to any discussions that we can have, and we look forward to some sort of a commitment from the federal government to ensure that economic benefit to Manitoba.
Senator Unger: I have another short question, and that concerns a reported class action lawsuit seeking up to $1 billion, which has been filed by former Aveos employees against Air Canada and the Government of Canada. In your opinion, would these former employees of Aveos lose all recourse against Air Canada and the governments of Quebec and Canada if Bill C-10 receives Royal Assent as tabled? If not, why not?
Ms. Stefanson: Sorry, who was that directed to?
Senator Unger: Anyone who wants to answer. Maybe the minister.
Mr. Cullen: I'm not sure what the ramifications could be. That's not something we've discussed at this time.
Senator Unger: All right.
The Chair: We'll do quick questions on a second round.
Senator Plett: Ministers, let me echo something you said. Your job is to stand up for Manitoba, and you're doing a fine job of it, and I encourage you to keep standing up for Manitobans. This is first and foremost your job. The fact of the matter is that even though my colleague seemed to think that wasn't, we have all been appointed — and I say we have all been appointed — to represent our provinces, first and foremost; we are Canadians senators representing our province. So I encourage you to stand up for my province of Manitoba, as I know you will.
Minister Stefanson or Minister Cullen, Senator Pratte seemed to suggest that if we didn't pass this bill here in the next few days, the bill would die. I didn't hear you asking us to kill the bill. I heard you asking us to make sure it didn't pass until something happened. Senator Pratte is new to this committee; he doesn't remember when we sat until the third week of July a few years ago. I would suggest there's not that much danger yet, just because today is Monday and we want to rise on Wednesday. We may all be here in July, working for the benefit of all Canadians and Manitobans.
Minister, did you ask us to kill the bill or just make sure it didn't pass until Manitoba had realized their net benefit?
Ms. Stefanson: Again, there are certainly parts of the bill that we respect and we agree with, such as the modernization of the act, as well as the change in the geographical scope.
But you're quite right, senator. We're just asking that the bill not be rushed through until such time as we're able to have the dialogue with the federal government and be assured by the federal government that there will be an economic benefit to Manitoba. That is exactly why we're here.
Again, there are components of it that we don't disagree with — that we believe could strengthen the act — but there are also components that have a negative impact on our province, and we will continue to stand up and do our job for Manitobans.
Senator Plett: As a Manitoban taxpayer, I thank you for that.
Senator Pratte: It's not a question. I just wanted to specify the timing issue here. I know full well that the bill will not die even if we delay, but timing is an issue. The Supreme Court will decide on July 15 if we're not to give Air Canada the permission to appeal. If they don't, then the Court of Appeal of Quebec decision stands, and that could have a major impact, including killing the centres of excellence for Winnipeg and Montreal. That would make these jobs disappear.
The Deputy Chair: Thank you, Senator Pratte, for bringing us up to date on the situation.
To our witnesses, I'd like to thank Deputy Premier Stefanson, Minister Cullen and Mr. Rebeck for participating in the hearings.
Let me introduce the members of our next panel. From the International Association of Machinists and Aerospace Workers, we have David Chartrand, Quebec Coordinator; and Fred Hospes, President and Directing General Chairperson, District Lodge 140. And from the Aerospace Industries Association of Canada, we have Jim Quick, President and Chief Executive Officer.
Mr. Chartrand and Mr. Hospes will share their speaking time, and then Mr. Quick will speak, followed by questions from senators.
Fred Hospes, President and Directing General Chairperson, District Lodge 140, International Association of Machinists and Aerospace Workers: We would like to thank the committee for this opportunity to appear to present our views on Bill C-10. The IAMAW is the largest union at Air Canada, representing 8,000 workers. We also represent the 2,600 Aveos workers who lost their jobs.
When Air Canada was privatized in 1988 through the Air Canada Public Participation Act, we raised our concerns that Air Canada would move its maintenance and overhaul operations outside Canada. The Progressive Conservative government of the day responded with legislation requiring Air Canada to maintain operational and overhaul centres in Montreal, Mississauga and Winnipeg. In addition, the government and Air Canada stated publicly that the act guaranteed that aircraft heavy maintenance overhaul employment would be maintained and even grow in those communities.
We have serious concerns with the introduction of Bill C-10. In particular, clause 1(2) of the bill explicitly allows Air Canada to change the type or volume of any and all of its aircraft maintenance work as well as the level of employment. It's very disturbing that the Liberal government brought this bill forward with no public consultation in an obvious attempt to render the recent Quebec court decisions irrelevant. Bill C-10 will simply allow Air Canada to move all of its maintenance and overhaul work abroad. This puts at risk thousands of good-paying, highly skilled, high-tech Canadian jobs for decades to come.
The current version of this proposed legislation is too vague. It takes away any leverage that any government currently has to maintain Canadian jobs in this industry. Under the current act, Air Canada's profits since 2012 were $53 million, $350 million, $531 million, $1.22 billion and $101 million in the first quarter of 2016.
We urge this committee to send Bill C-10 back to the house with the following recommendations:
First, maintain, at a minimum, levels and volume of maintenance in the provinces of Canada where it currently performs maintenance activities.
Second, contribute to the creation of centres of excellence in Quebec and Manitoba, while maintaining the current level of employment in any and all of those activities across Canada. Specifically, the corporation shall contribute to the creation of a centre of excellence in Quebec providing heavy maintenance of aircraft for at least 20 years, generating at least 1,000 jobs over 15 years.
Third, contribute to the creation of a centre of excellence in Manitoba by providing with three of its aviation suppliers and partners, generating at least 150 jobs.
Fourth, re-establish its former heavy maintenance and overhaul presence in Canada by repatriating the 2,600 highly skilled maintenance jobs lost following the bankruptcy and liquidation of Aveos. The corporation will require a completion date for this undertaking of no later than January 2019.
Bill C-10 endangers the livelihood of the Canadian MRO industry. Our proposed amendments force Air Canada to back up its vague promises of future jobs, while protecting the current industry and securing future employment.
Finally, we ask this committee to put forward and support these recommendations for the good of the sector and the good of the country.
David Chartrand, Quebec Coordinator, International Association of Machinists and Aerospace Workers: Thank you, honourable senators, for having us here today. In essence, Mr. Hospes said what we would like from this committee. We would like amendments, and we'd like things to remain as guarantees that we obtain and continue to do the work we do now and that we get back the work we used to do. I'm going to speak about two issues.
When a bunch of information is thrown at you about something that has been happening over the course of 20 years, sometimes you need somebody to bring things back into perspective and make people understand what the real issues are. In this case, it's been thrown at us that if we oblige or force Air Canada to do their own maintenance like they used to do, we will put them back under the Companies' Creditors Arrangement Act. I would argue that is false. The reason that Air Canada went under CCAA was not because of its maintenance. Never at any point has it been said that was the sole reason it happened. I would like to take people back in history and try to go through this as quickly as possible. I'll also try to address some of the questions because there may be some on this.
The fiction is that Air Canada went into bankruptcy because of its maintenance operations. The fact is that when Air Canada went under CCAA, they declared it because, successively, we had what was called the perfect storm in the air transportation industry. We had 9/11, we had SARS, and we had fuel costs — which are the majority of the expenses of an airline who operates — that shot up. Forty-five per cent of air transportation traffic went down after all these things happened at once.
You have the fact that Air Canada, once they took Canadian Airlines under them, took on a $3.5 billion deficit. What has to be understood is that when, in 1988, this company privatized and the bill went through, there was no debt. The debt accumulated successively, afterwards, because of a bunch of different reasons, none of them being a maintenance issue. Today, I would say the pied piper is trying to lead you down the road where the maintenance is the problem and we may have to put Air Canada back into CCAA.
The maintenance was not only profitable — they couldn't have sold it if it wasn't — but it also won awards in 2012 and previous to that, and you will see that if you look on Air Canada's website. We had quick turnaround times, we were profitable, and we had letters of recommendation saying that we were doing a great job in the maintenance centres throughout Canada.
I don't believe, and I don't think that you should believe. I think that you should be given the proper information by the people who can furnish it to you on whether maintenance was profitable or not.
Now, fuel costs shot up 30 per cent. SARS caused a major impact, and I've got all kinds of information here for anyone in the Senate who would like it. We can give you that information.
We've got articles in the newspapers, whether it be The Globe and Mail or Le Devoir — French and English newspapers — that state these things.
Following the merger where Air Canada took control of Canadian, it assumed its massive debt, which was estimated at between $3.4 million and $3.5 million. Not once did you see maintenance being an issue on its own. Although labour costs were spoken of, it was just in general. It was never just the maintenance. It was just that in general, they believed the labour costs were more expensive.
The fact is turnaround times were great, the quality was great, the cost was competitive, and Air Canada won awards, and you can see that in 2002. ACTS, which was Air Canada Technical Services, was ranked top MRO, or maintenance, repair and overhaul, in Canada and fourth in North America by Airline Business magazine.
I think everybody here should understand that you're being given information that Air Canada will be put into a position where they'll go back into CCAA because of maintenance. It wasn't maintenance. That was not the issue. There were a bunch of other issues spoken of, whether by Robert Milton or anyone else, and they always said the issues are the ones I stated before: SARS, 9/11 and the price of fuel, but not maintenance.
Level the playing field. That's another place where you are being given information and told that we need to level the playing field because we are competing with other companies who don't have the same restrictions we do.
I can tell you, with a little research, using what we have access to in Wikipedia and on other Internet websites, that the fiction is that carriers no longer maintain their own fleets. Air Canada, the Aerospace Industries Association of Canada and ICAO all have more information than we do. With a little bit of research we were able to find out that many of these companies that Air Canada is competing with do their own MRO.
The difference is that their governments and the carriers supported these companies to make sure that they would compete. Senator Black asked earlier why Delta doesn't do their maintenance here. You need an anchor. You need to have a company here that is supported. You need to have a service that you can offer to be able to attract these companies.
The fact is that Air China, through joint ventures between Air China engineering services and partners such as CFM International, Safran, GE, Ameco, and with Lufthansa Technik, do their own MRO work on their aircraft, nose to tail, like we used to do here for Air Canada.
The fact is that Air France, through KLM Engineering & Maintenance, an arm of Air France, does the same thing. And they're supported by their government and supported by their national air transport company.
Lufthansa airlines in Germany, through Lufthansa Technik — like ACTS was for Air Canada before it was dissolved or sold to Aveos and went bankrupt — is now the world leader in MRO services, and I believe that that was the benchmark for Air Canada at one point in time. Why that changed, we don't understand.
Delta Airlines has Delta TechOps, which does all the MRO for Delta, in Atlanta, with 51 stations worldwide, which provide full-service maintenance and services their fleet of 750 aircraft.
American Airlines, in Tulsa, has the world's largest airline-owned maintenance and engineering base, and their only customer, unlike other MROs, is American Airlines. They service all their aircraft, from nose to tail, and they are competitive and they are some of the competition for Air Canada.
US Airways, which merged with American Airlines, had its own MRO centres in Pittsburgh and Charlotte before the merger, which they continue to operate to service US Airways' legacy fleet.
So what I want the committee here to understand is all that information that's being thrown around about the boogeyman and what's going to happen — that we're going to close the company and it will go back under CCAA — isn't fair information. If you look a little bit, the information is out there. A lot of companies do their own MRO, from nose to tail, and they're profitable because they're supported by their government and by the national aircraft carrier, because they saw the value in keeping their own MRO and doing that work. By keeping it, they were able to offer this service to other companies. We never got to that point, and we were never able to get to it.
Now, in order to respect the privatization agreement in 1998, the arguments about competitiveness in a smaller-scale market will always be there. A lot of people ask why the legislation was adopted and why we went in that direction. Well, there is a method behind the madness.
In a large-scale market like the U.S., if the legislators at the time didn't want to protect those jobs and didn't want to make sure that we had an industry, they wouldn't have put that legislation forth. And when we decided to privatize Air Canada and them go with it, we put conditions there to be respected because we knew if we didn't we would lose that industry.
If you didn't want to preserve those jobs, why would we have put in the legislation that foreign ownership can't be more than 25 per cent? If we didn't want to keep those jobs, we wouldn't have put that legislation; we could have let an American company buy the airline. We'll have cheaper seats and we will do the maintenance somewhere else. There is a reason that legislation was adopted, and it is that we wanted to protect the industry to protect those decent-paying, high-tech jobs here. Now, today I don't see what has changed and why we should go down a road where we would take away those protections that we had here in Canada.
In closing, we're not standing before the impossible. We're before a situation where there's a lack of will and not a lack of capability. Legislators must decide whether to impose respect of the conditions agreed upon for the privatization of Air Canada in 1998. Should we ask the tribunals to give us additional leverage? Because right now, it is before the tribunals, and when we have an ultimate decision there, that will be the leverage that we need to negotiate and make sure that we keep those jobs here. If we give that away, we have no more bargaining power.
Or do we give a blank cheque to the corporation who has done everything to get out of its obligations over the last 25 years? This is a corporation that puts its own interests and the shareholders' interests before those of the Canadian MRO industry, the Canadian aerospace interest and, finally, before the interests of all Canadians.
Finally, I'd like to end with a comment from a journalist taken from an article published on March 24, 2012. The journalist said that Air Canada has a moral responsibility to facilitate a solution to conserve, in Canada, particularly in Montreal, the essential maintenance of its aircraft. This journalist, by the way, was André Pratte. I don't understand what has changed today.
This obligation is not only moral; currently, with the legislation we have, it's legal also. What's being proposed here is not only to take away that moral obligation, but also to take away the legal one.
Jim Quick, President and Chief Executive Officer, Aerospace Industries Association of Canada: Good evening, Mr. Chair and honourable senators. Thank you for the invitation to join you today to discuss Bill C-10. We are pleased to be here to provide our perspective on how this legislation will support the growth and competitiveness of Canada's aerospace industry.
AIAC represents Canada's aerospace industry, including the major manufacturers and their suppliers. Our members are a diverse group of companies that are world leaders when it comes to the design, manufacture and delivery of aerospace, space and defence products, as well as the maintenance, repair and overhaul, or MRO, of existing aircraft.
Aerospace is a global industry, so for us and our members, it is important to make business, policy and investment decisions in a global context. Aerospace supply chains are not limited to a single country or even to a continent, and our members are competing for contracts against other companies from all around the world.
Canada's aerospace industry is the fifth-largest aerospace industry in the world. For decades, we have punched well above our weight in the global marketplace. This is because we have built global leading capacity and capability when it comes to high-value, innovative aerospace products and services. We are home to a world-leading OEM in Bombardier, and we have fostered a highly innovative supplier base that is integrated into growing markets all over the globe.
The legislation in question comes in the context of the announcement of two centres of excellence that will drive aerospace innovation and capacity in Montreal and Winnipeg, two of Canada's major aerospace clusters. These centres of excellence will help us to maintain our competitive edge in a global marketplace. They will help us to ensure that Canadian aerospace firms continue to expand their capacity and capability to offer innovative solutions not only to Air Canada but to other major airlines and operators all around the world.
In Montreal, a centre of excellence focused on maintaining the C Series will establish an important competitive advantage for companies seeking to conduct maintenance, repair and overhaul activities on this new platform.
Bombardier is a world-class manufacturer, and they have created a world-class aircraft. As the C Series enters into service, this is a prime opportunity for Canadian companies to secure a competitive advantage when it comes to contracts for any MRO activity related to the aircraft, not only for Air Canada but for other major global airlines.
Manitoba is already home to a highly innovative aerospace sector. Winnipeg boasts Canada's largest aerospace composites manufacturer centre, an industry-leading cold-weather engine-testing facility and the world's largest independent gas turbine engine MRO company in StandardAero. The presence of a centre of excellence focused on MRO activity represents a new opportunity to develop additional capacity and capability for Manitoba aerospace companies that can be exported to the international marketplace.
Being competitive in a global industry requires an environment in which companies have the ability to make business, policy and investment decisions in a global context. If our companies are going to survive, they need to be able to compete against the rest of the world, and we know that they can.
For AIAC and our members, Bill C-10 is not only about providing services within Canada or to one Canadian company; this is about the way in which we build an environment for our industry that makes Canadian aerospace industries more innovative and more competitive on a global scale and more able to attract business from airlines and operators all over the world.
Thanks to the strength of our industry and thanks to smart investments in innovations such as these centres of excellence, we are confident that Canadian companies will continue to win contracts with Air Canada and other airlines and operators. We believe that Bill C-10 supports innovation, competitiveness and Canadian growth at home and in a global marketplace. Thank you very much.
The Deputy Chair: Thank you, Mr. Quick. We'll have questions from senators. We'll start with the bill's critic.
Senator Plett: I have a few questions for each of you. Unfortunately, Senator Pratte isn't a witness here today, so we can't ask him about his article, but he may choose to comment later on. If not, I'll certainly talk to him about it offline at some point. I'm interested in that.
Mr. Chartrand, first question for you: Have you discussed Bill C-10 personally with the Minister of Transport?
Mr. Chartrand: Thank you, senator, for that question to clarify things. On a number of occasions, I tried to. I take objection to the fact that he says he talked to labour, spoke to me and had a discussion, because that is absolutely false.
He was at the certification of the C Series. I am a 26-year employee of Bombardier, and I negotiated the last four contracts over there. I'm proud of the C Series. He was there for the C Series airplane. So was I. I crossed over to him there, and I asked if we could have a meeting to talk about Bill C-10 — or the impacts of the job losses of Aveos and all those things — and he said to speak with his cabinet minister, his —
Senator Plett: Deputy minister?
Mr. Chartrand: Exactly. He walked away from me. I talked to the deputy minister, and I wasn't able to get a meeting. We sent letters. Actually, before —
Senator Plett: So the answer is no.
Mr. Chartrand: The answer is no — simple as that. We didn't have a meeting.
Senator Plett: Next question: In the house committee, you commented that changes such as those put forth in this bill can work and be agreeably implemented, but this bill cannot and should not be implemented.
How would we implement and agree to the —
Mr. Chartrand: There would have to be amendments, sir. There would have to be amendments that at least guarantee what we have now.
Senator Plett: So we would still need a bill?
Mr. Chartrand: Definitely.
Senator Plett: Okay, thank you.
How does Canada's current aerospace maintenance industry match up with the rest of the world, and how would said ranking would change if we passed Bill C-10?
Mr. Chartrand: I believe that our MRO industry would be hurt. Right now, 2,600 jobs have gone. There are another 2,400 jobs at Air Canada right now in line maintenance. If we pass the bill, we're giving them a blank cheque saying that if they don't want to do that line maintenance here, they don't have to. We're also telling them that the jobs are gone, it's not just the jobs but the work; the work that has been sent offshore doesn't have to come back.
One of the reasons companies want to come to establish themselves in the aerospace industry in Canada is because of our diversity, capabilities and knowledge. By giving away that MRO work, we're reducing our knowledge, capabilities and flexibility of being able to work on a bunch of different aircraft and being able to innovate by seeing what's wrong with the current aircraft and how we can build a better part. Other companies have done this; they were MROs before they became manufacturers.
Senator Plett: How much money would Air Canada save if they moved their maintenance out of Canada?
Mr. Chartrand: That will have to be answered by Air Canada. I'm not the one to answer that.
Mr. Hospes: I couldn't answer it, either.
Senator Plett: I'll ask them.
Mr. Quick, you talked about the purchase of the Bombardier jet. It's a good jet. I certainly support that and agree with that. I think we have a great aerospace industry in Canada, both insofar as maintenance is concerned and the manufacturing of airplanes.
There has been talk that if we don't pass this bill, the deal that Air Canada has with Bombardier to buy 75 of their jets may be in jeopardy. Is Air Canada buying Bombardier jets to appease the Province of Quebec, or are they buying Bombardier jets because they want to buy a good airplane?
Mr. Quick: I would hope they are buying the aircraft because they believe it is a world-class aircraft.
Senator Plett: I hope so, too.
Mr. Quick: I certainly don't know otherwise, nor have I been engaged in any discussion otherwise. I think this aircraft is the most innovative and best technology development that we've seen since the late 1980s as it relates to the development of brand-new aircraft.
I suspect that this aircraft is going to be a world leader when it comes to its ability to reduce our environmental footprint, for example, by reducing noise, the light landing of the aircraft, the passenger safety and comfort — it's second to none. I believe that it's an aircraft that people will want to buy.
Senator Plett: So we shouldn't allow that to play into any decision we make here today? They will probably buy those jets because they're getting a good deal and they're buying good airplanes.
Mr. Quick: They are buying a good aircraft for sure.
Senator Plett: I'll go on a second round, chair.
Senator Eggleton: I'd like to ask Mr. Chartrand about some of the comments he made. You cited a number of airlines internationally and you said that national governments support them. I take it these are national airlines, flagship airlines of different countries. Could you tell me specifically how those countries support them? Just a couple of cases.
Mr. Chartrand: Like I said, as to the information, I don't have an incredible database, other than Wikipedia and the companies' own websites, when I look at Delta TechOps and American Airlines and all of that. But, looking at the websites, they have support from their federal governments through a number of subsidies, tax breaks for the airports they fly out of, partnerships where the government will invest along with the national carrier so that they can keep their MRO business and all that. There are a number of different ways in which the government is helping their industry, the MRO industry, and their flagship carriers to continue to do their own maintenance. When the flagship carrier doesn't want to do it, they do like Air Canada did with ACTS, like Delta TechOps did, like Lufthansa Technik did. They break off an arm and support that arm to make sure that they're able to do their own planes and offer the services to others.
Senator Eggleton: Those are all incentives, tax breaks, subsidies of one sort or another, but they're not legislation like this one. They're incentives.
Mr. Chartrand: You're right. Can I add to that, though?
Senator Eggleton: Sure.
Mr. Chartrand: We've got WestJet. We've got Air Canada. We've got a bunch of different companies that are competing here in Canada, and why are they being treated differently? I don't think that the Crown gave 109 planes to WestJet. I don't think the treatment of those companies was the same because they were not Crown corporations. I think this is a different situation, and we have to see it as a different situation, where somebody got a leg up, got an advantage. They made an agreement to obtain those advantages, and, today, they don't want to respect that agreement anymore. I have an issue with that.
Senator Black: Mr. Chartrand, a couple of questions for you, if I may: With respect to the data you've presented to us, I won't get into a dueling data conversation here, but I do have, from 2014, which is the most recent information that I have, a statement from the International Air Transport Association, an organization that you would be well aware of. They said airlines subcontract 65 per cent of maintenance activities. That's their statement in 2014. I don't have anything more current than that. Any comment on that?
Mr. Chartrand: I don't have that data. So I can't really comment on it.
Senator Black: Thanks very much. You also made a suggestion that we shouldn't be convinced that if we pass this, for some reason Air Canada would have to avail themselves of CCAA protection. I've never heard that suggestion. No one has made that suggestion to the best of my knowledge. Have I missed something?
Mr. Chartrand: Sir, when I was, with all due respect, in the Senate last week and there was a discussion on the second reading of the bill, Senator Pratte asked whether we wanted to put restrictions or continue to put restrictions on an aircraft carrier that will put it back in the position or could put it back in the position it was in when it was under —
Senator Black: That's helpful, but you would have me consider that there is a possibility that, if we pass this legislation, Air Canada, with $1.2 billion in profit last year — and you were good enough to provide the information for the last five years — would seriously be in that position? What judge would ever entertain that application?
Mr. Chartrand: I don't think so.
Senator Black: Right. Okay.
Mr. Chartrand: That's what I'm trying to make everybody here understand, that it's not going to put them back into trouble if they have to do their own maintenance.
Senator Black: We are completely aligned.
Mr. Quick, please. Mr. Chartrand was asked by my colleague Senator Plett whether or not he believed that the MRO capacity in Canada would be adversely affected if we pass Bill C-10. Would you choose to comment on that?
Mr. Quick: Yes. As I mentioned to you in my comments, our industry is very global-looking. Any program or policy change that we ask the government to consider is all geared toward how we compete better, at a higher level, from a global perspective. For me, MRO is no different than we would be on the manufacturing side or on the supply chain side. My point is that the development of centres of excellence increases our global competitiveness. Therefore, it allows us to export that into other jurisdictions.
So I understand that provinces like Manitoba want some certainty and predictability about what this actually means for them, but, from a national policy perspective, we would say anything that allows us to compete at a greater level globally is a good thing for our industry.
Senator Pratte: One question for Mr. Chartrand or Mr. Hospes, and one for Mr. Quick.
First of all, I want to make sure I understand correctly the amendments that you are proposing to Bill C-10. If I understand correctly, you would like the bill amended so that Air Canada has to bring back the 2,600 jobs that were lost.
Mr. Chartrand: The amendment requests that it's reinstated like it was in 1988, the obligations that Air Canada had to have certain work done here, whether it be components, the engine, the heavy maintenance.
Senator Pratte: Which is what was done by Aveos in 2012?
Mr. Chartrand: Correct.
Senator Pratte: So you would want the jobs that were lost in 2012 back. You would want the jobs presently done guaranteed, and you would also like a guarantee that the future jobs that Air Canada now mentions in the centres of excellence are also guaranteed, right?
Mr. Chartrand: There are commitments that were made. We want those as guarantees because former commitments, which were in the law, were not respected. So we have a hard time with verbal commitments.
Senator Pratte: Since you've mentioned other airlines, how they work and so on, are there any other airlines in the world that have such commitments by law that they have to respect as to the number of jobs or where they have to do their maintenance, et cetera?
Mr. Chartrand: I really wish I had that information to give to you today, but I don't.
Senator Pratte: Mr. Quick, we are faced now with two scenarios. Either we delay Bill C-10 for weeks or months or I don't know, and there's a court decision, this Court of Appeal ruling that would apply, which would, in some way, force Air Canada to re-establish the maintenance shops that existed, with maybe a number of jobs — we're not too sure — or we pass Bill C-10 and their centres of excellence, but with a dose of uncertainty. We don't know exactly how many jobs would be created. We don't know how the C Series will go. We don't know if it will be 1,000 jobs or 500.
For the industry, can you comment on both of those scenarios because there are jobs, possibly, in both of these scenarios?
Mr. Quick: Senator, we've seen in the past that some decisions have actually cost jobs in Canada, and the jobs are really about capacity and capability because our talent is really our people. From that perspective, my colleagues' arguments are correct from the standpoint that we have lost some capacity, some capability. One of the things that we really like about Bill C-10 is, in fact, the centres of excellence because the centres of excellence are really about the development of new capacity, new capability, and that new capacity and new capability are things that you can export all across the globe.
We haven't taken the position to pass or not pass the bill. We see that through the centres of excellence there's a real opportunity here to develop additional capacity and capability from Canada; and we would like to see that.
The Deputy Chair: Before we go to the second round, I'd like to ask a question while I have the witnesses here.
Four years ago when Aveos went bankrupt they put 2,600 people out of work. How many of Aveos's former maintenance workers in Winnipeg, Montreal and Mississauga have been hired by Air Canada and by other maintenance service providers? Could someone answer that question?
Mr. Chartrand: Nobody has exact statistics on that because not everybody kept in touch. I can tell you that with Lockheed Martin in Montreal and A J Walter Aviation Limited, we have about 110 ex-Aveos employees working at AJW and about 110 at Lockheed Martin. That's about 220. Then, take an offshoot of about 200 people that relocated either to Bombardier, Rolls-Royce, Pratt & Whitney and some of the surrounding companies. I'm talking about the province of Quebec only. I don't have the statistics for Manitoba. I can tell you that roughly 400 to 500 people have relocated, many of them not in the same trade. These were certified technicians who took eight years of training to be where they were and are now working as assemblymen on an assembly line because they couldn't relocate in aircraft maintenance.
The Deputy Chair: Do you know if any of them relocated outside the country in aircraft maintenance?
Mr. Chartrand: Not outside the country. Many did not relocate here in Canada. Many changed jobs and avenues. I know one guy who's working for the City of Saint-Sauveur. These were people who relocated and had to take new training because the opportunities weren't there for them as aircraft technicians.
Senator Plett: Let me put on my other hat for a while. I've been leaning towards the negative side of this bill. Your suggested amendment — and I need to get my head around that — is that we should bring back all the maintenance workers that weren't there. I assume that Air Canada is not breaking the law right now. You're hesitating, so I want you to give me a brief answer on that. If they are breaking the law, to what degree would you suggest? I'm asking this question because if they're not breaking the law, I feel fairly comfortable flying with Air Canada. I think their airplanes are maintained fairly well. A few too often we are delayed because they need to fix something, so it's a better thing than if they just take off without fixing; and I appreciate that. How can we ask Air Canada to give 2,600 people employment if they don't have the work for them?
Mr. Chartrand: If they didn't have the work, you wouldn't be flying in a safe airplane, sir.
Senator Plett: You say they need 2,600 more people.
Mr. Chartrand: No. I'm telling you that all that work is now offshore. It's done in the U.S. at Duluth, Minnesota, in Israel, and in other countries. It used to be done here.
Senator Plett: It is now being done there?
Mr. Chartrand: Yes.
Senator Plett: Why we do need Bill C-10 then at all, if they're doing it already? Why do we need Bill C-10?
Mr. Chartrand: You don't hear me arguing. You won't hear me arguing. Bill C-10 is there; and I'll tell you why. Because there is a decision from the Court of Appeal that stands right now until the Supreme Court either overturns it or maintains the decision that says that they are breaking the law. That decision, by the way, wasn't rendered by three judges, which is extremely rare from the Court of Appeal. Five unanimous judges said exactly what's in the bill right now. The level of employment, the type of work and all that have never been clearer since that Court of Appeal's decision. The language in the law was a grey zone. People went to court to get it clarified, and in court they clearly talked about the components, the engines and about maintenance nose to tail — the line maintenance, the heavy maintenance, everything from A to Z, which is not being done here anymore.
Senator Plett: In order to get the level of maintenance that we need, which we want in Canada and which they are now illegally doing, according to you, out of the country, we need 2,600 more maintenance people.
Mr. Chartrand: Is it still the equivalent of 2,600? Now the fleet has changed. It's not the same number of planes. There are newer planes, and newer planes need less maintenance. I wouldn't say it's going to be the exact same number of jobs. Take the C Series. A heavy maintenance centre for the C Series, you're not going to see any work before at least 10 to 15 years because you don't need any heavy maintenance on the plane until it's at least done a number of hours and until they need to do it. Right now, the fleet has changed. The number of jobs may not be the same, but about the kind of work that we were supposed to do, that's where the law is being broken.
Senator Plett: Why can you not tell me, and I will ask Air Canada this, the number? You should know how much more money or less money it would cost Air Canada if that maintenance were done in Canada? I have a problem that you don't have that number. That is a number you should have. Are unions here more costly than they are in Israel and Duluth and wherever else they're going? I agree with the comment you made at the start, and you were at my second reading speech.
Mr. Chartrand: Yes, I was.
Senator Plett: You heard me say that I have never heard them use that particular issue as an argument. I agree with that part of it. They've always talked about fuel costs and 9/11, but not this. I still would like to know, and I won't beat you up on this so I'll ask Air Canada, how much money they're saving by doing what they're doing.
Mr. Chartrand: I wouldn't take it as beating me up, sir.
The Deputy Chair: Before we continue, I want senators and the audience to know that the issue upstairs is not a vote. It's a bell regarding some issues with the microphone system, so they've just suspended for a few minutes. You can consider it the dinner bell if you want.
Do any senators have other questions for our guests? Before you go, I have another question with regard to maintenance. Perhaps this should go to Mr. Quick.
Transportation economists told the House of Commons Committee on Transport about the high cost of spare parts and that facilities that provide heavy maintenance for large aircraft tend to be located close to where most of the aircraft are manufactured, which is outside Canada. In the case of Bombardier, these planes will be in Canada. I'm curious: Does this represent a significant opportunity for Canadian workers? If so, why? If not, why?
Mr. Quick: As I mentioned, senator, any time you can add to your capacity it's a good thing for our industry and for our workers. Having centres of excellence in Montreal and Winnipeg is a significant benefit to our industry. There's tremendous competition across the globe for MRO industry development. Many countries, like Singapore, for example, base their whole aerospace industry on MRO. For me, the development of the centre of excellence and having it here in Canada is a significant benefit not only to our industry but also to the development of our workforce as well.
The Deputy Chair: One more question in that area, if I may. According to your association statistics, maintenance, repair and overhaul services in Canada grew by 37 per cent between 2004 and 2014. In light of the collapse of Aveos and the loss of those jobs, does the aircraft maintenance sector continue to grow in Canada? Is it still growing despite that?
Mr. Quick: Yes, it is. It faces significantly more competition than we've had in the past, but it continues to grow.
The Deputy Chair: Thank you.
If there are no more questions, I'd like to thank Mr. Chartrand, Mr. Hospes and Mr. Quick for participating in the hearing.
Honourable senators, our meeting tomorrow morning will start at 9 a.m. with witnesses from the Fédération des travailleurs et travailleuses du Québec and from Air Canada. In addition, the steering committee is recommending clause-by-clause consideration at the end of these meetings.
Honourable senators, the meeting is adjourned.
(The committee adjourned.)