Proceedings of the Standing Senate Committee on Transport and
Issue 5 - Evidence
OTTAWA, Tuesday, June 11, 1996
The Standing Senate Committee on Transport and Communications, to which was
referred Bill C-20, respecting the commercialization of civil air navigation
services, met this day at 3:30 p.m. to give consideration to the bill.
Senator Lise Bacon (Chair) in the Chair.
The Chair: The meeting will come to order. On the agenda today is Bill C-20, an
Act respecting the commercialization of civil air navigation services.
Appearing today from the Department of Transport are Paul Gauvin, Senior
Assistant Deputy Minister, Gord Wilson, Legislative Advisor, and Daniel Paris,
Senior Negotiator, Human Resources Panel.
The witnesses will be allocated one half-hour to make their presentation and
provide the necessary information. The second half-hour will be set aside for
the members to ask questions.
Senator Forrestall: Madam Chair, I must leave at 4:00 today in order to attend a
funeral. Perhaps I could pose just two or three questions on the areas of
concern that I have, and then perhaps the deputy minister could address them in
The Chair: Very well.
Senator Forrestall: Perhaps we could learn for the record the current status of
this bill. In other words, is it deficient, and if so, for what reasons? What
must we do, with it? Shall we amend it or simply send it back to the chamber?
Second, would the deputy minister address the questions raised by Mr. John
Crichton, the new chairman of NAV CANADA, and the question that I raised last
evening in the chamber, that while under the excise process, certain sums are
raised each day to meet ongoing costs. That is not an instrument that is
available to the new corporation and I would like to know how they will fill
this gap. We have an organization here today suggesting that this matter may
not be able to go forward, that their financing may be in some jeopardy because
of some uncertainties in the act. In other words, they may have a bridging
problem. I have problems with our bridging, too. I also have problems with the
bridging with respect to the total amount of funds. This is a debt proposition
from beginning to end.
I would say to the deputy minister, carry on with your intervention as usual,
and keep those thoughts in the back of your mind for addressing at the
tail-end, or at some appropriate point in your remarks.
Mr. Paul Gauvin, Senior Assistant Deputy Minister, Department of Transport
Canada: We are here to present the bill for the commercialization of the Civil
Air Navigation System, including the responsibility for the management of all
Canadian airspace and international airspace over the North Atlantic, as
delegated by the International Civil Aviation Organization, ICAO. That comprises
approximately 6.8 million aircraft movements, and that was in 1994. It involves
6,400 employees in the Department of Transport at the present time. This is one
of the largest air navigation systems in the world, comprising of seven area
control centres, 44 towers, 86 flight service stations and a whole network of
electronic navigation aids.
This exercise started with the budget of February 1994 when the federal
government announced that it wished to review the potential for the
commercialization of this activity. In April 1994, we had the first meeting of
an advisory committee, made up of users, unions and a whole lot of other
stakeholders from the aviation community, culminating in public consultations
during August and September of 1994.
In February 1995, it was finally decided that it was the firm intention of the
government to actually commercialize the Air Navigation System, and NAV CANADA
was incorporated. We started the negotiations on the due diligence process in
June of 1995, with panels formed on such matters as finance, technology,
corporate, human resource and legal in July of that year. On September 8, 1995,
we signed an MOU with the unions, NAV CANADA and Transport Canada to outline
what benefits would be transferred. On December 8, 1995, we reached an
agreement in principle on the price, and it was agreed that, upon transfer, the
government would receive a cheque for $1.5 billion, net. In March of 1996, we
introduced the legislation in the House of Commons.
Another key date is April 1, 1996, when we reached an agreement to transfer.
After due diligence, we agreed on all of the various conditions that we would
need to make this happen.
The functions to be commercialized include air traffic services, all the
technical services associated with that, including maintenance and engineering,
the system requirements, planning and procedures, aeronautical information, the
Transport Canada Training Institute, which is located in Cornwall, and all the
support services that accompany the Air Navigation System, or ANS, such as
finance and personnel. Within Transport Canada, these were all part of the
department, so that they must be broken out as to which portion is allocated to
The rationale for commercialization is that commercialtization is a key element
of government streamlining and resource reduction, and this came about as was
part of Transport Canada's program review. It was driven by the need of users
for an efficient, responsive and affordable service, and it was felt that,
operating outside of a government environment, NAV CANADA would be able to
adapt more quickly and efficiently to commercial, operational and technological
developments. While the government will not operate the system, it will still
obviously focus on standards and safety, and those activities would remain
within Transport Canada itself.
After extensive consultation with industry users and other stakeholders, a
number of models were considered: seven in total, and three in detail. The
three considered in detail were: whether the new entity should be a Crown
corporation, a mixed enterprise -- including both private and public components
-- or a nonprofit corporation. After a great deal of deliberation with the
users, the unions and the stakeholders, it was decided that basically this
would be a not-for-profit corporation.
NAV CANADA was then formed in May of 1995. The corporation was expected to be
financially self-sufficient and would operate in a similar fashion to a cost
recoverable public utility, with all profits being reinvested within capital or
new technology, R&D, in order to reduce debt or reduce user fees.
Dealing with the corporation NAV CANADA, the articles of incorporation and
by-laws were approved by the Minister of Transport. Changes to key articles and
by-laws require the Minister of Transport's consent, and some examples of that
would be governance, accountability, and the structure of the board of
directors. There must be mandatory consultation and transparency of information
on changes in user charges, facilities and levels of services.
The nature of NAV CANADA is that of a not-for-profit entity; that is, without
share capital, and basically with a wide range of perspectives represented on
the board. We feel that this offers safeguards against any abuse of monopoly
power. The board of directors is made up of 15 members: five are appointed by
the users, two by the unions, three by the government, and four are
independently chosen by the board as members at large, and the chief executive
officer is also chosen by the board.
With respect to the user-appointed directors, four are to be appointed by the
largest national association of air carriers. That is currently ATAC, or Air
Transport Association of Canada; one director to be appointed by the largest
national association of business aircraft operators, currently the Canadian
Business Aircraft Association, or CBAA. National associations have members from
all parts of the country, and ATAC's membership is drawn from carriers of all
sizes. The by-laws of NAV CANADA require consultation with bona fide regional
air carrier associations in the appointment of the four air carrier directors.
With respect to the deal itself, the government will sell, lease or otherwise
transfer all ANS property and assets used by Transport Canada in providing ANS
services. That includes lands, buildings, electronic systems, aircraft,
existing agreements including the Canadian Air Traffic Control System, or
CAATS, chattels and intellectual property. NAV CANADA will assume all
obligations and liabilities related to assets. All employees in support of ANS,
that is the 6,400 employees I mentioned previously, will be offered employment
with NAVCAN, with equivalent benefits. There will be no financial guarantees
provided by the federal government. The corporation, NAV CANADA, will be
totally self-sufficient and independent.
The price: The value of ANS business was originally estimated by the financial
consultants Nesbitt Burns at approximately $1.3 billion in November 1994. Then
after that time, there were a number of improvements in the revenues, including
the Air Transportation Tax, the introduction of overflight fees, achievement of
operating efficiencies, as well as a fairly intense negotiation process which
increased the value to between $1.8 billion and $1.9 billion gross.
On December 8, 1995, the government signed an agreement in principle for $1.5
billion net. The difference between the gross and net amounts is because NAV
CANADA will assume basically three responsibilities, one of which is that for
any downsizing activity, NAV CANADA will assume all the costs of early
retirement or early departure, which is the same program as the government has.
On top of that, NAV CANADA will assume any grievances that are in the system at
the date of transfer. All of those will be settled by NAVCAN and will become
their financial responsibility after they take over. On top of that, NAVCAN has
also agreed that all foreign state and military aircrafts will be exempted from
In terms of the instruments of transfer, there is an Agreement to Transfer which
sets out the terms and conditions. Two pieces of legislation are involved: the
Aeronautics Act and this particular bill that we are discussing today, the
Civil Air Navigation Services Commercialization Act. The Aeronautics Act and
regulations pursuant to that act will ensure safety, which remain part of the
Department of Transport, and Part VIII of the Canadian Aviation Regulations
will address the provision of civil air navigation services. Regulations will
be in effect prior to transfer of ANS.
Bill C-20 establishes the supremacy of the Aeronautics Act. Nothing in this bill
affects the application of the Aeronautics Act. The changes in facilities and
services will be subject to the Aeronautics Act and any regulations made under
that act that relate to aviation safety or the safety of the public. The
Aeronautics Act will also be amended to authorize the minister to make and
enforce an order to maintain or increase civil air navigation services.
At this point I invite my colleague Gord Wilson to continue with the
organization of the legislation itself.
Mr. Gord Wilson, Legislative Advisor, Department of Transport Canada: I will
continue with a quick look at each of the ten sections of the legislation. The
ten sections are set out here in the bill, beginning with the basic definitions
and interpretations that go to some length, because it is very important to
establish and define the obligations that we are imposing upon NAV CANADA, and
the privileges that we are extending to them. That is why this document goes on
at some length.
In that section, NAV CANADA is defined as the ANS Corporation. You will see ANS
Corporation throughout the bill. This is the key section in which it is stated
that nothing affects the application of the Aeronautics Act -- the Aeronautics
Act being the key piece of legislation that governs safety in Canada.
Therefore, while Bill C-20 has few explicit statements about safety, it provides
key linkages to the Aeronautics Act wherein safety is governed. There is also a
statement that nothing takes away from the authority of the Minister of
National Defence under the National Defence Act.
There is a short section on transfer arrangements, extending the authority to
the minister to sell, lease or otherwise transfer the assets. Those authorities
exist currently through a number of different pieces of legislation, and this
brings it all together in one place. There is a clear statement that NAV CANADA
is acting on its own, and is not an agent of the Crown.
There is a lengthy section dealing with the provision of services. First, NAV
CANADA is obligated on day one to take over all civil air navigation services
that were previously provided by Transport Canada, and to provide them to the
same extent. That is the initial obligation. Thereafter, NAV CANADA may make
changes to those services if they follow a process that is set out in the
legislation. That process is that whenever changes are considered by the NAV
CANADA board to likely affect a significant group of users in a material way,
then they are required to go through a process of public notice. Those kinds of
changes include increases or decreases in services, or closure of facilities.
The process itself involves extensive public notice, and a requirement to notify
all associations of users, and to notify anyone else who has expressed any
interest in receiving notification under this act. There is also a requirement
for notification through a general means, in this case through the Internet,
and in the case of changes to designated northern or remote services there is a
requirement to provide notification to provincial and territorial governments.
Such changes may be implemented within 60 days of the giving of that notice, but
subject to the satisfaction of the minister that safety is being maintained.
Safety will be ensured through regulations made pursuant to the Aeronautics
Act. Those regulations allow the minister to request an aeronautical study to
show that service changes will not negatively affect safety. An aeronautical
study is one in which the safety implications of a change in service are
reviewed, and alternative courses of action are explored.
The minister may direct NAV CANADA to maintain an existing service. The minister
may also direct NAV CANADA to increase the level of service if required in the
interests of safety. This legislation includes consequential amendment to the
Aeronautics Act to establish that authority.
NAV CANADA will be given a monopoly in certain services, subject to a limited
number of exceptions. The key elements of the monopoly are the air traffic
control services, the flight information services relating to the handling of
flight plans and the provision of ground and traffic advisories, and
aeronautical information services.
I mentioned that there were a limited number of exceptions, the key one of which
is the exception that allows the Minister of National Defence to continue to
provide air navigation services that that department is providing today. There
are lesser examples. Essentially, the policy here is that where someone exists
today and is operating an air navigation service, they may continue to do so
thereafter. There is, for example, one single private operator of an air traffic
service in Portage la Prairie, and the legislation protects the right of that
individual to continue doing so.
NAV CANADA is designated to the International Civil Aviation Authority as
Canada's authority for air traffic services and aeronautical information. NAV
CANADA may plan and manage the use of the airspace, but are subject to the
Governor in Council's right under the Aeronautics Act to make regulations in
respect of the classification and use of airspace. The authority to classify the
airspace rests with the Governor in Council on the recommendation of the
minister, but it gives NAV CANADA, as the monopoly operator of many services
and the predominant operator of other services, an opportunity that they need
to coordinate the system and ensure the system's integrity.
There are provisions to allow NAV CANADA's technical and operational standards
in respect of navigational aids to be included by reference in the minister's
regulations. Again, they may make recommendations to the minister, but the
authority to set those regulations rests with the minister. They may also make
recommendations to the minister in respect of the minimum amount of liability
insurance that a provider of navigational aids should have, and the
consequential amendment section of Bill C-20 provides the authority for the
minister to do so.
A special process exists for changes to designated northern and remote services.
A list will be created by the minister; in fact, it already exists. That list
has been the subject of consultation with provincial and territorial
governments. It establishes services that may only be reduced by NAV CANADA if
they follow a certain process. If any of these reductions is likely to affect a
significant group of users or residents, in this case because it is northern
and remote, and there is a special importance of air transportation in those
areas, NAV CANADA must provide the public with notice. They may not make the
reduction if there is opposition from an affected provincial or territorial
government, or unless users accounting for more than two-thirds of the revenue
agree with the change. If one of those two groups does not give their approval
to the reduction, then NAV CANADA may go to the Minister of Transport and
request the minister's approval. Before a change can be made to a designated
northern or remote service, it is necessary to get the approval of a quorum of
users, the affected provincial or territorial government, or the Minister of
There is a section dealing with the establishment of level of service policies.
Within a year of transfer, NAV CANADA must establish and publish level of
service policies. There is a requirement for them to go through the normal
public notice requirements. They are obliged to apply these policies in a
consistent manner. Then, if a person requests services in excess of the level
set out in the published policies, there is a requirement on NAV CANADA to
provide those additional services only if there is evidence that a majority of
users who will be affected in a material way by those additional services are
in agreement with the proposal. There is a section that sets out who has a say,
and that allows an opportunity for someone wanting additional services to
The Governor in Council, on the recommendation of the Minister of Transport, may
direct NAV CANADA to do certain things in respect of northern and remote
locations; things in the interest of national security and things pursuant to
an international agreement. Financial compensation would be possible in the
first two cases.
The charging sections give NAV CANADA the authority to impose charges for
availability or provision of services. DND aircraft would be exempt from the
charges. This is an important point, because it is not an outright exemption.
It is, in fact, a swapping of services between the Minister of National Defence
and NAVCAN whereby NAV CANADA agrees not to charge the minister's aircraft for
using NAVCAN services and, in exchange, the Minister of National Defence allows
NAV CANADA to impose charges for services that the minister provides. It
happens that it is a very close exchange in terms of dollars, and that the
revenue that NAV CANADA is foregoing is roughly equivalent to the revenue that
the Minister of National Defence is allowing NAV CANADA to generate. The
arrangement has many advantages. The Department of National Defence does not
want to get into the business of billing users. It also has advantage for users
in that they will receive one bill, not one bill from NAV CANADA and a separate
bill from the Minister of National Defence.
Foreign state aircraft would be exempt from charges unless the Governor in
Council directs otherwise. Basically, that would be a case where, if a country
charges Canadian state aircraft, then the Governor in Council might well allow
NAV CANADA to charge aircraft of that state.
The legislation contains charging principles that provide the parameters within
which NAV CANADA must establish its charges. These principles deal with
transparency, safety, structure, impact, quantum and international obligations.
These charging principles provide protection for users against the abuse of
monopoly power, and NAVCAN is allowed to impose the same charges when they take
over the operation as the Minister of Transport did prior to the transfer.
There is a requirement for public notice to all interested groups, including
anyone who expressed an interest in being notified. The notice must invite
representations. Having considered all representations, NAV CANADA may then
announce its decision, but not less than 60 days later. Having announced the
decision, then 10 days later they may introduce the charges, and as a result of
consultations, they may implement a different charge than originally proposed so
long as it would not generate more revenue. The idea here was to provide no
disincentive for them to act upon good things they heard about during
There is an appeal process. Users may appeal new or revised charges to the
National Transportation Agency. However, this will not be not the usual NTA
process; it is a special process, expeditious and tightly defined, and this act
takes away certain powers of the NTA in respect of these particular appeals.
The appeal can only be made on the basis that the charging principles have not
been observed, or that the notice requirements have not been given. The agency
can order refunds if the fines and the charging principles have not been
observed. The agency has 60 days to make a decision. In special circumstances,
it can have another 30 days. All decisions are final and binding, and of course
there is always the opportunity for judicial review.
During the first two years, NAV CANADA may seek the approval of the Minister of
Transport for its charges to provide greater certainty to its revenue flows in
this critical period. The minister would likewise make the decision based upon
the charging principles, but not with respect to the quantum of the charge. The
feeling is that, as a not-for-profit entity, this organization will not pursue
any higher charges than it must. There are collection provisions regarding
joint and several liability, and authority to seize an aircraft for nonpayment.
There is a human resources section that sets out how the employees will be
transferred to NAV CANADA. Employees who are transferred cease to be public
servants at the time of transfer. Those rejecting offers of employment cease to
be public servants six months after being so designated. For a period of one
year they have a priority status for reappointment to the public service, and
the Workforce Adjustment Directive, the Early Departure and Retirement
Incentive Programs and the Executive Employment Transition Policy do not apply
to the employees so designated, and this act makes such programs inapplicable.
Collective agreements and arbitral awards are continued and remain in force
until expiration. NAV CANADA will assume the role of employer in the case of
any grievance, conciliation or arbitration proceeding that commenced before the
transfer. For purposes of the Canada Labour Code, employment of transferred
employees is deemed to be continuous for purposes of leave entitlements and
things such as that. The bargaining agents are deemed to be certified under the
Canada Labour Code.
Employees transferring to NAV CANADA are entitled to severance pay in respect of
their government service. This is a confirmation of what exists already by way
of their collective agreements, and it is made clear that when an employee
becomes eligible subsequently for severance pay from NAV CANADA, the period of
entitlement excludes any years of service with the government.
There is a provision that, in the event of work stoppages, NAV CANADA would be
required to provide services necessary for humanitarian and emergency flights.
In order to ensure this, NAV CANADA and the unions must enter into an emergency
services agreement, and if such an agreement is not reached within 90 days of
the expiration of a collective agreement, a mediator/arbitrator will be
appointed with power to conclude such an agreement.
Control and enforcement is taken through two steps: It is possible for a person
to go to the superior court of a province in order to obtain a restraining or
compliance order, and then there are fines -- in some cases quite hefty; up to
as much as $100,000 a day for not providing the services to humanitarian or
The Official Languages Act applies to NAV CANADA as if it were a federal
institution. There is a further requirement. Some government departments did
not have the authority to provide certain continuing services to NAV CANADA,
particularly during the transition, such as payroll services, and there is a
section to give that authority to them.
The financial arrangements section -- and I think at this point I will expand on
the question that Senator Forrestall raised -- provides the minister with the
authority to enter into an agreement to provide payments during a transition
period not to exceed two years. These payments are necessary during that first
two-year period when NAV CANADA is putting its full complement of user charges
in place. A maximum of $1.44 billion has been set aside. That amount is based
upon anticipated revenues from the Air Transportation Tax during that period.
The question that was raised referred to statements that the Air Transportation
Tax is used to help pay for air navigation services, meaning that it does not
cover all of the costs. Up until November of 1995, the Air Transportation Tax
accounted for 90-plus per cent of the revenues of the air navigation system.
The only outside revenue sources were charges that Canada levied for services
provided in the international airspace over the North Atlantic Ocean.
In November of 1995, Transport Canada introduced charges for aircraft overflying
the country. In the first year, those charges are expected to generate about
$165 million of revenue per year, and that was a large jump in the overall
revenues. Right now, the revenues for air navigation services would be about
$700 million from the Air Transportation Tax, and about $200 million for the
combination of the overflight charges and the oceanic charges. Whether or not
that will cover all of NAV CANADA's costs in the first year, particularly
taking into account the debt servicing, remains to be seen, but historically
the revenue sources from the ANS have not covered all of the costs that
Transport Canada incurred, including capital costs, for air navigation services.
That takes me to the consequential amendments. The intent is that the Air
Transportation Tax would disappear after two years. It is authorized by the
Excise Tax Act, so there is a consequential amendment to strike that provision
from the Excise Tax Act. There are a number of amendments to the Aeronautics
Act to allow the minister to make and enforce orders to NAV CANADA to provide
services and to authorize the minister to make regulations in respect of the
minimum insurance requirements and to take away the authority of the Minister
of Transport and of the Minister of National Defence to impose charges for
civil air navigation services.
There are then two conditional amendments to recognize that parts of the act
refer to acts that, at the time the bill was drafted, were the subject of
separate acts not yet passed. Bill C-14, which is one of the two involved, has
subsequently received Royal Assent.
Senator Forrestall: I would be interested in hearing more about the degree to
which the new entity will avail itself of information from AWOS. I am very
concerned that they take any at all. I think the whole thing should be
I want to ask one question: You are suggesting future amendments, as you have
delineated here, to the Aeronautics Act. Amendments have been made to the
Aeronautics Act since the late 1930s. When will we scrap that act? It causes
more anxiety and worry among those who must fly airplanes than any other single
factor that I have run across -- not icing, not fog, not snow on the runways,
not any of these things at all, but an ancient, archaic, probably useless piece
of legislative. When will they draft a new one? Many of these things could be
so much easier and simpler if only that would happen.
Mr. Gauvin: We do not have any plans right now to draft a new bill. If you wish
to have further discussion on that, we could bring our experts on the safety
side to address your committee. That is the act which supports all the safety
regulations that govern the air transportation in this country, and it is the
background that Transport Canada will use to ensure that all the regulations are
still there after NAVCAN transfers; to ensure that all the various regulations
and all the requirements under the safety purposes are made; to ensure that,
while it is a private entity, that the government still ensures that safety is
the most important thing at all times.
Senator Forrestall: I appreciate your response; I did not actually expect one,
to tell you the truth. I think the Aeronautics Act is an ancient piece of
legislation whose time has come. It has served Canada well but, as we go into
the next millennium, I would like to see an aeronautics act that was written in
the '90s, or somewhere around the turn of century. Jet aircraft did not exist
when this act was written, and 17-hour workdays were quite commonplace.
Senator Spivak: I do not quite understand the changes in international
arrangements. There is now an Air Transportation Tax which will be augmented
for this period by overflight charges to foreign aircraft. There are now user
Mr. Wilson: Yes.
Senator Spivak: If there are now user charges then the Air Transportation Tax
goes away --
Mr. Wilson: Yes.
Senator Spivak: -- because now they will just use the user charges? Is that
right? Does this mean that the passenger, the consumer of services, et cetera,
will be subject to increased taxation or decreased? What will happen here? Will
we get more money out of consumers of service, or less money in the end after
all this is done?
Mr. Gauvin: The way in which the transfer is being done is that for the first
two years only, the government has agreed to give a contribution to NAVCAN
basically equivalent to the Air Transportation Tax. Therefore, NAVCAN would not
bring in user charges for those first two years in addition to what is already
being collected. For the first two years they would get the Air Transportation
Tax that the government was collecting, and those sums would go over to NAVCAN
in the form of a contribution.
On top of that, they would also have access to the en route charges, including
the charges for overflights, which will be about $200 million a year or so.
That is $700 plus $200 or so, about $900 million and, depending on the traffic,
that could rise up to $1 billion. This is approximately a billion-dollar
Senator Spivak: It costs a billion dollars to operate this corporation?
Mr. Gauvin: This is approximately a billion-dollar operation, yes. If you take
all of your 6,400 people, their salaries, plus all of the cost that goes with
that, plus capital, and then they will also be borrowing money initially to set
themselves up, and there will be interest on that money. After two years, the
Air Transportation Tax will be eliminated, and NAVCAN will bring in user
charges; their own user charges to cover all their expenditures in order to
make this operation whole.
Senator Spivak: However, the point is: Will those user charges generate more
than what is generated by the user charges that are now in place?
Mr. Gauvin: One of the reasons the users were so anxious to have this become a
commercial operation is that they feel that outside of the government
environment, the government with all its rules and regulations, they felt that
they could operate more cheaply on the administrative side. In addition to
that, they feel there are savings they could bring in through streamlining the
operation that might be a little more difficult to implement within a
government environment. The whole thing together, and why they support it so
much, is that they feel the corporation can be operated more cheaply, and as a
result, would be less costly to the carriers. That is why the carriers supported
this privatization so much.
Senator Spivak: In other words, there is nothing in writing that says they
cannot increase those user charges, right? I mean, they are nonprofit, they
will do whatever, and common sense tells us that we almost never go down, we
always go up, so that is just their hope and their feeling. In other words,
there are no studies that show this result. What are the costs that they will
eliminate, that the government now imposes, that will enable them to operate
Mr. Gauvin: There are many opportunities. If this operation had remained within
government, and as we all know right now, government has downsized considerably
and is reducing costs to adjust the deficit, this would have had at least a
20-per-cent reduction over the next three years through various streamlining
efforts. I will give you one example: Right now, there are seven air control
towers across this country. We probably no longer need seven towers. The
technology has now evolved to the point where they could probably do with
On the administrative side, there are five regional offices across the country.
There is really no reason to have regional offices as large as the ones we now
have. In other words, there are opportunities for reducing expenditures and, as
a result, reducing costs.
Senator Perrault: First of all, I am supportive of this proposal. It makes
sense. There seems to be a certain feeling in society these days that is
widespread, relating to aircraft safety. The so-called "open skies"
policy in the United States has been sort of a mixed blessing. There have been
tragic and traumatic events in Florida. People are asking whether or not
aircraft are properly inspected and serviced.
I would like you to express your view on this. The suggestion has been made that
the "open skies" policy is very much like rabbits being in charge of
the lettuce patch. When the users are in charge of safety standards they will
have every incentive to reduce their spending and their costs, and perhaps even
their servicing. I am being the devil's advocate here because I think we are
moving in the right direction. Are you concerned that there could be a
reduction in the service standards because the major carriers will be playing
such a key role, and they might want to reduce costs in a very competitive
Mr. Wilson: From the outset, we recognize that the first thing we had to take
care of here was to make sure that the system remained as safe as it always has
been under government operation, and while we are commercializing the operation
of the system, we are really just splitting the responsibility that now rests
fully with the government as a provider of service and as a regulator of
service. In turn, we are keeping for the government that role as the regulator,
and it is just the provision of the service that will be commercialized.
What we will have is a situation not unlike what we have today in the industry
itself, where the government does not fly the airplanes; it is the commercial
operators who fly them, and it is the government who sets the standards,
enforces them and monitors them.
We believe that the framework that has been established with this initiative
will ensure safety right from the start, with the assurance that the
Aeronautics Act remains supreme through the regulations that are being put in
place. What is happening in that regard, at the moment, because of the fact that
the department operates the service, there is a body of internal policies,
practices, procedures all laid out in the great detail that are internal
documents, and they are enforced through the management of the department. What
we are doing is giving legal effect to all those same policies, practices and
standards and putting them into regulations, Part VIII of the Canadian Aviation
Senator Perrault: With the cutback in costs, budget reductions and everything
else, safety is number one?
Mr. Wilson: Safety is number one. Senator, I could go on with other aspects of
this bill right down to the way in which charges are levied.
Senator Perrault: Have we drawn any of this proposal from U.S. experience? A few
months ago, I was on a flight in the United States and it was like a cattle
drive: total disorganization from the check-in to the check-out, bad food
service and all of the rest. We have all heard these horror stories about
Valujet where they have been ordered to establish a better servicing procedure
in the United States. The company has ten days in which to comply. I think you
are all aware of that. They had been farming their work out all over the world,
to Turkey and to other nations, and the Federal Aviation Administration told
them, "You must have this done properly, and it must be done in one shop."
Are we avoiding that kind of problem in this proposal of yours?
Mr. Wilson: In our view, we have taken all of the precautions, yes.
Senator Perrault: A pilot of a light aircraft told me last evening that now he
files a flight plan and it does not cost him anything, but now with this user
pay service, he will stop filing a flight plan and what he will do is telephone
on ahead and say, "Charlie, I will be there in an hour and a half, and if I
do not land, you had better start looking for me." It is pretty basic
stuff. Have you heard this concern?
Mr. Wilson: This is one of the fundamental principles of charging for a
safety-related service. It is set out in guidelines from the International
Civil Aviation Organization, and it is a principle that the Department of
Transport has adhered to through the years, and that is that it is not the mere
fact that someone pays for a service that gives them incentive to be less safe;
it is the way in which they pay. For example, if you say to someone "If
you ask for this weather briefing, it will cost you ten dollars" then they
have the incentive not to ask for it. However, if you have a general charge, in
the form of an annual fee or something, for using the system that is
independent of any specific service that they want to use at a particular time,
then in that way the user makes a contribution to pay for the system, but does
not have the incentive to avoid using a particular safety-related service.
One of the key charging principles -- it is paragraph 35(1)(b) I believe -- says
that the charges must be structured in such a way that will not provide a
financial incentive for people to forego the use of safety-related services.
That is one of the most fundamental principles of charging, and so it would be
outside the bounds of this legislation for NAV CANADA to charge in that way.
Senator Perrault: You would find a diplomatic and acceptable way to obtain fees
from pilots of the type that I have cited?
Mr. Wilson: Yes, and in fact when a representative of NAV CANADA is here,
perhaps they will speak to this issue. Certain aspects of the legislation were
put together to provide ways for NAV CANADA to seek a contribution from
recreational and private aviation, recognizing that group's price sensitivity,
in order to obtain some contribution while allowing that segment to continue
thriving in Canada. A principal way is one in which there is a flat annual fee,
so that while they make nominal use of the services, it is fair that they make
a nominal contribution towards paying for the services.
Senator Roberge: Do you have financial projections from NAV CANADA, projections
which have been presented to you, or given to you, or worked out with you?
Mr. Gauvin: We have worked with our own financial advisors and have made
financial projections to ensure that, with what they must pay for this system
and equipment so that they can operate after the privatization, they would be
in a position of being able to recover their costs and cover their
expenditures. However, we have not had access to NAVCAN's figures.
Senator Roberge: That is what worries me a little bit, and I would like to see
what your projections are. For example, I heard you say that the operation of
the system presently brings in revenue of probably $1 billion a year. However,
if they are borrowing $1.4 billion, the servicing of that debt with only the
aforementioned revenue -- how will it come down to the bottom line?
Mr. Gauvin: NAVCAN feels that there are lots of opportunities for streamlining
in this operation.
Senator Roberge: I have heard that before, and the question is if it does not
happen, what does it create?
Mr. Gauvin: If it does not happen, basically the only other option would be to
increase their fees to cover their expenditures, because this is a nonprofit
corporation; there are no shares.
Senator Roberge: That comes back to Senator Spivak's point, and I would like to
see the projection that the ministry has made, plus I would like to see the
projection that NAVCAN has made so that we can see and ascertain for ourselves
what sort of financing there is.
Mr. Gauvin: What makes this transaction unique is that the carriers themselves
were so supportive of this initiative.
Senator Roberge: Carriers can make mistakes, too.
Mr. Gauvin: There are carriers are on the board of directors, however, and they
will be a big part of this whole operation.
Senator Roberge: It would be fitting if the members of the committee could have
access to that type of financial information, so that we could have a look at
The Chair: Do you have that type of information that has been requested by
Senator Roberge, or is that something which is confidential? Is there, perhaps,
supplementary information you can supply to us?
Mr. Gauvin: I am hesitating because there were negotiations on both sides, and
in arriving at a price for the system, we had our figures and they had their
figures, and we have signed a confidentiality agreement with NAVCAN that we
would not release this information until the transaction is completed. I must
go back and review the situation with our own legal experts.
The Chair: We will have the NAVCAN people here so that you can ask questions of
Senator Roberge: They sent two different sets of figures, so it would be
interesting to see the difference.
The Chair: Perhaps you could find out whether there is any possibility of
furnishing the committee members with that type of information?
Mr. Gauvin: I will review that with our legal people and I will get back to you,
Senator Spivak: I want to know the number of people whom you have employed in
enforcing the Aeronautics Act, and whether that number is part of the group of
45,000 civil servants who will be laid off. I would also like to know whether
the 6,400 public service employees who, as you have told us, will now be
working for NAVCAN are part of that overall number of 45,000 civil servants who
are slated to be laid off. That would give me a clue as to why this is
happening. Are they included or excluded in that number, or are they in
addition to the 45,000?
Mr. Gauvin: They would be included, I suppose, in the 45,000 reduction because
those 6,400 people will cease to be public servants. NAVCAN will become a
private employer, totally outside of the government. I do not know for sure,
since the figures you are quoting are Treasury Board figures, but I would
assume that these movements of employees are shown as a reduction in the
Senator Spivak: That strikes me as being a very good motive for the government
making this transition because, of course, it shifts 6,400 employees off the
public payroll, even though the users of the service will still be paying for
that service by way of whatever user charges they will pay.
Mr. Gauvin: We have about 2,000 people in the department who are responsible for
the enforcement across the country of the Aeuronotics Act, and none of those
people are part of this downsizing. That number of employees will not be
reduced. As a matter of fact, it will probably be increased.
Senator Spivak: Is that a matter of government policy, and are there any
documents or anything that we could look at as evidence of the government's
firm intention not to reduce the enforcement force? Obviously if you have, as
you said, the rabbits tending the lettuce patch, you also must see that Farmer
MacDonald has enough people to ensure that the rabbits do not eat the lettuce.
Mr. Gauvin: I can assure you that safety is the number one issue.
Senator Spivak: I am sure it is. When we sat through the Freedom to Move session
and the one on transportation policy, they told us that safety was the most
important issue and that this privatization would help matters. By the same
token, however, we have not seen implementation of all of the remedies that
were proposed in the Air Ontario Inquiry, and all of those things that were
deemed to be wrong with the Department of Transport have not yet been
corrected. In addition to that, we are hearing about trucks travelling on our
highways that, in my opinion, are compromising safety a great deal of the time
safety. The statement is always made that safety is number one, because that is
how you sell a very difficult bill. The question is where is the evidence?
Where is the documentation to that effect? What can you offer in terms of bona
fides to prove that, indeed, the government does not intend to lay off or
reduce any numbers from those 2,000 people; that, in fact, they are looking to
increase that number. Where is the evidence?
Mr. Gauvin: I must go back and see what we can dig out for you, but after all of
our transactions are completed, the new Department of Transport will basically
consist of 3,500 employees, of whom about 2,000 are involved in a safety role.
Senator Spivak: The new Department of Transport is a mere shadow of its former
Mr. Gauvin: That is because many of the operations which they previously ran are
now being commercialized. However, that does not mean that safety is not still
the most important issue.
Senator Spivak: I do not impute any motives to you at all. I just want to see it
in black and white, and that would be very helpful to me.
Mr. Gauvin: We will see what we can get for you.
Senator Roberge: I did not quite get your answer to the problem raised by Mr.
Crichton on clauses 11 and 13 which should come into force on the transfer. It
says here that:
We have discussed these issues with the Department of Transport and while they
are of the opinion that there may be an alternative, they reluctantly agree
with the proposed amendment.
Mr. Gauvin: That is a very technical issue, obviously, and it had gone through a
lot of people, and this was discovered at the very end.
Senator Roberge: The thing is that if there is an alternative, then we should
know about it and understand it; if not, we will make some proposed amendments.
Mr. Gauvin: Basically, what NAV CANADA is looking for is an amendment under
clause 100 of this bill, which comes into force on the transfer date rather
than at Royal Assent. When this bill gets Royal Assent the whole bill comes
Senator Roberge: Even the financial implications?
Mr. Gauvin: Yes. Under clause 100, which deals with a consequential amendment to
the Aeronautics Act, and states that:
No order or regulation may be made under this Part that has the effect of
imposing charges for civil air navigation services.
The intent of that clause is that the Minister of Transport would relinquish
his authority to charge for the services being transferred to NAVCAN. This was
something that NAVCAN had requested. They wanted to make sure that it was
inserted in this bill. There was concern because of the large amount of money
that NAV CANADA must borrow. Also, because NAVCAN does not have any
shareholders, it was felt that lenders might regard any residual charging
authority for the minister as a threat to NAVCAN's exclusive right to charge.
They wanted to make sure that once they take over this operation -- and rightly
so, because they have no shareholders -- that the government would not charge
for any of these services.
The problem relates to the effective date. Bill C-20 does not contain a specific
coming into force section, meaning that all sections become effective upon
Royal Assent. The result is that the minister's authority under the Aeronautics
Act to impose overflight and oceanic charges would cease upon Royal Assent.
There could be a gap.
Senator Roberge: I understood that. What I was trying to find out is the
alternative to what is proposed.
Mr. Gauvin: The alternative would be for NAV CANADA to impose its own oceanic
and overflight fees on its first day as the operator of the ANS.
Senator Roberge: As of Royal Assent?
Mr. Gauvin: No, on the transfer date. That means that there would be a gap of
approximately 11 days. The company would need one day to impose the charges,
although it would need to do a great deal of consulting before it imposes them.
Therefore, it could impose them within 11 days: one day to impose them, and it
would need ten days to give public notice. That means, therefore, that for its
first 11 days of operation, the company would not be able to collect these
revenues, but they could make up those revenues in the future. That was the
Senator Roberge: It is not so much a revenue loss as it is the power to borrow.
Mr. Gauvin: The contention of NAVCAN is that it would affect their power to
borrow. Because there are no shareholders, they must borrow all of these sums,
so they have asked for this amendment.
Senator Roberge: I understand. I think it is a good amendment but I thought you
had an alternative.
Mr. Gauvin: That was the alternative. It is a risk. The risk is: Can they or can
they not borrow? Our feeling is that they could still borrow without this sort
of amendment, but they would rather have the situation really clean, and they
are sure that the amendment would cover that.
Senator Roberge: With respect to the strike mandate, there is no provision for
emergency service, for example, once we are into this new organization. If
there is a strike, what about emergency service? You say in here somewhere that
you feel that this item should be dealt with, if at all, in the review of the
Canada Labour Code, and not by way of Bill C-20. However, that review may be far
down the road, and we might end up with a strike before it occurs, so why not
deal with it now?
Mr. Daniel Paris, Senior Negotiator, Human Resources Panel, Department of
Transport Canada: The legislation includes specific ways in which emergency
services and humanitarian flights must be serviced during a strike, and the
whole process is in place to provide for that, so your question as it relates
to any major emergency, or a medical flight, or with respect to flights in or to
northern or remote areas, those services must be maintained, and the
legislation lays out the process by which parties would agree on what those
services would be and how they would be delivered by the employees.
Senator Roberge: That is fine. I am not worried about this requirement because I
think it is properly covered. However, a big portion of the structure of the
economy of the country could go to pot because a massive strike occurs, and no
more flights can leave, or what have you. I am talking about flights other than
humanitarian or emergency flights. I should like to know what will happen in a
situation such as that.
Mr. Paris: The Minister of Labour has indicated that there is a review of the
Canada Labour Code, and it was felt at Transport Canada that we would not
introduce a piecemeal restriction to the right to strike in the legislation,
which does not exist under the Canada Labour Code because it would create a
special regime for air navigation as opposed to rail, or other
federally-regulated services where there are no restrictions to strike.
It was felt that a regime where the emergency flights or humanitarian flights
would be covered would be acceptable, and that the fundamental right to strike
would not be addressed in this legislation but through a review of the whole
labour regime. If it were to be done through this legislation, then we could
end up with various regimes. Also, the right to strike is quite fundamental in
the Canada Labour Code, and in all legislation so dealing with it. Why, then,
restrict it in the air navigation system, and not deal with it in the train or
other federally-regulated services?
Senator Roberge: Why is it now? What I mean is that they do not presently have
the right to strike.
Mr. Paris: They have the right to strike, but they are all designated, which
means that, in practice, their right to strike is severely limited within the
federal sector and according to the rules under which they work today. However,
under the Canada Labour Code, those provisions do not exist.
Senator Roberge: If they have successor rights going into the new company, maybe
those successor rights should apply to the same things.
Mr. Paris: As the legislation is written now, it has provided a bridge that
would not normally exist; previously there was no bridge to allow an automatic
transfer from a government operation to a private sector operation, so we had
to create that bridge. However, importing the designation process of the public
service under the Canada Labour Code may not be the most appropriate way to
handle restriction if there were to be a restriction on the right to strike
because, after all, a strike normally hurts economic objectives, and yes, this
Senator Roberge: Let me try it another way if I may: Right now, there is a
bridge for two years on the financial situation which is "subventionnée"
by the government. Would the same two-year successor rights apply to that
situation in order for the Canadian Labour Code to be amended or changed?
Mr. Paris: There is no framework under the Canada Labour Code to accommodate
such a proposal and, again, we were very reluctant to touch the right to strike
on a piecemeal basis, meaning that it would be there for the air but not for
the others. There was this desire to provide for the essential part, which is
the humanitarian and emergency flights, and of course there is the economic
part, which I agree is there, but it is the same for all federally-regulated
Senator Roberge: When you were talking earlier, I heard you say that there is a
minimum liability insurance which may be made or imposed by the government. Has
the amount been defined?
Mr. Gauvin: There would be an agreement with the Department of Transport as part
of this transaction, and there would be a minimum requirement of a billion
dollars, and NAVCAN accepted that.
The Chair: Coming back to the amendments proposed by NAVCAN, I am a bit
surprised that they write in their letter that the Department of Transport
reluctantly agreed with the proposed amendment. Was there an oversight when
drafting the legislation, or is it something that NAVCAN really needs and if
they do not get it they will lose millions of dollars? Because this means an
amendment proposed by the committee that must be adopted by both houses. Did you
not see that amendment in the Department of Transport before you drafted the
Mr. Gauvin: It was missed by a lot of people. While we reluctantly agreed to
another amendment, we feel that basically it would be cleaner for NAVCAN to
start with its financing in order, and be able to impose the user charges
immediately. Therefore, it really was missed.
The Chair: This matter was discussed between you, the department and NAVCAN?
Mr. Gauvin: Yes, there was a lot of discussion.
Senator Perrault: It happens in all different types of legislation.
The Chair: That is what the Senate is there for, I guess. Although those in the
other house do not like the Senate too much, we are here to make corrections or
amendments and to have the proper bills adopted, and save money for people.
Mr. Gauvin: As I mentioned, basically without this amendment we still feel that
the transaction could go on, but we feel it would be a lot cleaner if the
amendment was made.
The Chair: What would happen if we could not send the bill back to the house
because they were away on vacation for a while and we had to wait until
September? Would that mean a cost to NAVCAN?
Mr. Gauvin: We still have a lot of work to do to make this transaction happen,
in terms of declining assets and all of those things. It would probably
postpone the transfer by about a month.
The Chair: I would like to file as an exhibit that letter we have been
discussing, and have that recorded in the minutes of the committee meeting:
Exhibit No. 59000 T1-2.35/C-20, 1, "1" -- Letter to the Chair from NAV
CANADA, dated June 11, 1996, signed by Mr. John Crichton, Chairman.
Senator Spivak: I notice that on the provision of services for designated
northern and remote services -- let me see if I have this straight -- if all of
the affected provinces, territories and other users, accounting for more than
two-thirds of associated revenues, do not agree with the termination or
reduction of services then they may seek the approval of the minister. Is that
Mr. Wilson: That is correct.
Senator Spivak: The minister could override the affected provinces, all the
affected provinces and territories and all the users, accounting for more than
two-thirds of associated revenues. I would say there is a high likelihood that
the minister in Ottawa, the provinces, the territories and the consumer may not
have the same views. It happens all the time.
Do you not think that this particular provision is a recipe for confrontation
and litigation? Why was it worded that way -- either/or? It could have been all
of them, or none of them. I do not understand that.
Mr. Wilson: It was an attempt to strike a balance between the public interest of
northern and remote communities and the commercial interests of NAVCAN.
Senator Spivak: I quite understand that.
Mr. Wilson: That balance was to give the provinces and territories an
opportunity to comment on it, give the users who will pay the bill a chance to
comment on it, and in most situations a reasonable decision will be reached.
However, there is an opportunity for users to appeal a charging decision of NAV
CANADA, and there is an opportunity for appeal for NAV CANADA if they feel that
decision is inappropriate.
Senator Spivak: What we see happening in Canada today is a move away from
transportation as a public utility and towards commercial service. This move is
supported not only by those commercial people involved but also by the
government, so who is standing up for the public interest? Transportation is
absolutely essential to the economy of Canada, and certainly to the north, and
they are standing up for it as well as the users. Soon we will have the
government and the people who are running the service saying, "No, no, it
is for our commercial interest. We cannot do this, that or the other."
That is happening throughout the transportation system and, generally speaking,
at least as far as railways are concerned, there is more of a balance in terms
of the appeal process than what looks to be the case here. I suppose after this
process is exhausted, they can then appeal to the courts, is that it?
Mr. Wilson: No.
Senator Spivak: They cannot?
Mr. Wilson: No.
Senator Spivak: Then it is worse than I thought. This is reminds me of the
Pearson deal. They cannot appeal to the courts? That strikes me as being a very
Mr. Wilson: It provides several opportunities for some kind of accommodation to
Senator Spivak: Was there much comment on this aspect in the House of Commons
Mr. Wilson: No, and in fact we had a high level of satisfaction fed back to us
from the provincial and territorial governments with whom we consulted.
Senator Spivak: Then who am I to question that?
Mr. Gauvin: Perhaps, I could just add one further comment to that: This is a
very special section that was added in there for the north, so that NAVCAN
could not reduce service up there without the agreement of the province or the
territories. If they did not agree, it would be very unusual for the minister
to go against them.
Senator Spivak: There is one other thing I must ask you -- and I suppose this is
really up to NAVCAN -- I notice that there is only one woman on the board among
all of the board members, which strikes me as being a bit odd.
Senator Roberge: Especially after Mr. Chrétien's comments that it should
be 25 per cent.
Senator Spivak: Right. They must use both official languages but they do not
need to appoint any women to the board. That is just a comment.
Senator Landry: Who will appoint the members to the board of directors?
Mr. Gauvin: The board of directors is appointed by a number of people. The board
consists of 15 members, and five are appointed by the users through ATAC.
Senator Landry: By "the users," you mean the airlines?
Mr. Gauvin: The air carriers. Two are appointed by the unions which will form
part of this company, and three are appointed by the government. Then after
that, those members who have already been appointed get together and appoint
four more. In other words, that group appoints four more directors at large.
Added to that, the chief executive officer is also a member of the board of
directors. That makes up the 15.
Senator Landry: What would the salary of the CEO be?
Mr. Gauvin: The salary of the CEO would be set by the board of directors.
Senator Perrault: These are outside directors, are they? Are they appointed from
other industries? Outside directors serve on companies, not involved with the
Mr. Gauvin: That is right. These people do not have full-time jobs with the
company; they serve on the board and that is it.
Senator Perrault: They protect the public interest?
Mr. Gauvin: That is right.
Senator Landry: There are some directors from the government?
Mr. Gauvin: Three are appointed by the government.
Senator Perrault: The unlimited liability for the directors, will they be
subject to limited liability or what, exactly?
Mr. Gauvin: That would be a question that could be addressed to NAVCAN when they
are here, but our understanding is that they have taken insurance for liability
for the directors' responsibilities. They are fully protected, I am sure.
Senator Adams: What role does the NTA play in this situation, now that this bill
is before Parliament? I mean, it has passed the House of Commons, but is there
still some sort of hearing process before the NTA? some of the small airlines
in the north make applications from time to time for new routes to fly to other
communities, for example. How will this bill affect that process? I mean, what
happens now at the NTA? Will there no longer be hearings when carriers apply for
licences to fly to other communities?
Mr. Gauvin: This bill in no way affects the status of the NTA, or National
Transportation Agency. They still have their responsibilities totally separate
from this bill. NAVCAN will have nothing to say in terms of routes or anything
Senator Adams: Then NAVCAN will act just like Transport Canada does today,
running the system for the airlines, and looking after all the weather
forecasts and all the other stuff such as landings and take-offs?
Mr. Gauvin: The National Transportation Agency will still be there to rule on
our routes and all that sort of thing. NAVCAN will be buying its service, for
example its weather service, from Environment Canada, and they will be paying
for it as part of their fees.
The Chair: I want to tell the members that tomorrow, Wednesday, we will be
sitting at 3:30, and again next Tuesday and next Wednesday at 3:30. We will
hear NAV CANADA, the bargaining agents association, and for next Tuesday we
will send you a list of the people who will be here so that you can prepare.