Proceedings of the Subcommittee on
Transportation Safety
Standing Senate Committee on
Transport and Communications
Issue 9 - Evidence
OTTAWA, Monday, April 14, 1997
The Subcommittee on Transportation Safety of the Standing Senate Committee on Transport and Communications met this day at 12:07 p.m. to study the state of transportation safety and security in Canada.
Hon. J. Michael Forrestall (Chairman) in the Chair.
[English]
The Chairman: Welcome to the continuation of the work of the Subcommittee on Transportation Safety. We will carry on today with Pem-Air Ltd.
Please proceed.
Mr. Delbert A. O'Brien, President, Pem-Air Ltd.: Good afternoon, honourable senators. I must apologize for not typing the proposal. We have been on holidays and we had to construct this in a hotel room. The only positive aspect of the presentation is that my wife copied it over so it is readable.
I should also say that I probably overstated the case in this brief, but we taxpayers do not have an opportunity to speak before the Senate that often. It seems to be a one-way street and so I want to make the most of this opportunity.
I am the president of a small commuter airline based in Pembroke, Ontario. We have operated continuously for 28 years in providing scheduled services. We currently fly 28 flights per day to 13 communities in both Ontario and Quebec. All services are provided in both official languages.
My appearance before you is a return engagement for me as I appeared more than a decade ago before the House of Commons transportation committee chaired by Patrick Nolin, MP, as it examined the anticipated impact of the new deregulation policy on the air industry
Today, although we focus on the narrower issue of safety, we are reviewing an industry that has been driven in the past decade by the force of government's deregulation policy.
I, perhaps, bring a different perspective to this investigation because I speak primarily as a lawyer with 34 years of practice behind me and with aviation as a secondary pursuit in my life experience.
I have always had a keen interest in government policy as it impacts the industry and particularly the effects of the deregulation era. As a result of this special interest, I was favoured as a panelist at a conference of the Air Transportation Association of Canada, or ATAC. That conference took place 10 years ago in Vancouver. On that panel were Don Carty of CP; Victor Popolardo of City Express; Max Ward of WardAir, and an Air Canada vice-president.
I represented the small air carriers, and I had done my homework by acquiring volumes of information on the American deregulation experience from Senator Kassebaum, the Republican chairperson of the American Senate Aviation Committee.
The evidence I gathered indicated that the American government was very concerned about air safety issues at that time and that while mega-cities had benefited from some reduction in fares, 400 smaller communities had lost their air service and fares had increased between 600 and 700 per cent in remote areas.
At the conclusion of my remarks, several of the panelists suggested that I was being perhaps too negative with respect to deregulation. I responded by suggesting that, in my opinion, their positions and their airlines might well disappear within five years. With the exception of the government airline, Air Canada, that prophecy was regretfully fulfilled.
In my opinion, airline safety has been a major public issue continuously since the introduction of deregulation. I also believe that there has been a universal effort to cover up the problem driven by consumerism as it espoused the mythology that deregulation would decrease fares by increasing competition.
Why is it that the media, the government and the public still cling to the myth, in the face of so much evidence to the contrary, that unbridled laissez-faire economics in the skies will bring more competition, cheaper fares and safety? I should say at this time, I am not from the political left.
Let us examine for a moment, the evidence as to fares. While airfares from mega-hubs have decreased marginally, such as flights from Toronto to Florida, they have increased substantially where it really counts to Canadians as they fly within Canada and particularly to smaller communities.
As a result of competition in south-central Ontario, my backyard, and the area I will discuss, the following airlines have terminated scheduled service in the past decade: City Express, Voyageur, Southeast Air, Muskoka Air, Trent Air, Air Niagara, Toronto Air, Nor Ontair, Laurentian Air, NordAir, Partner Skycraft, Tempus, et cetera.
With respect to communities served, once again in Ontario, many communities have lost service including Hamilton, Peterborough, St. Catherine's, Brockville, Cornwall, Trenton, Muskoka, Oshawa, St. Thomas and Chatham. In Northern Ontario, the prospect for many more is uncertain.
Finances impact on safety issues directly. The industry has been on a downward financial spiral since the introduction of deregulation which has severely diminished general aviation in this country. Banking institutions, which initially favoured deregulation, have closed their doors to small airlines, defining the industry as a bankrupt one. I was amused at that time when my bankers told me to expand; in fact, I contracted my services.
There is little wonder that financial institutions are dismayed when they read in the daily press that the industry has lost more money in the last decade than it made in the previous six decades.
Air Canada has wasted millions of its equity in an insane price war with Canadian Airlines which today threatens the existence of Canadian Airlines and will, if continued, lead to monopoly and eventual American ownership. That is a prediction.
Let the world know that the greatest single threat to safe operation is financial crisis. The cruelest hoax of the deregulation mythology is the fostered untruth that airplanes can be flown successfully at bus fare rates.
The tolerated deception of advertising of cheap seats promotes this fraudulent and destructive illusion. It appears to me that the federal transportation ministry under both major political parties, with their political vested interest of proving that marketplace economics work in the airline industry, have turned theirs backs on the most flagrant evidence of safety failures flowing from that policy. I will refer to only two examples, but there are many more.
The independent judicial inquiry into the Dryden tragedy exposed deregulation as the root cause of the accident. The NationAir fiasco, with its ridiculous $88 fares served to drive Pem-Air out of two cities, Hamilton and Kitchener, and left a legacy of debt -- $67 million to the general public and $27 million to Transport Canada -- when we had to pay our fees in 30 days on penalty of being discontinued the use of the airports. This speaks volumes on the calculated blindness of government policy to the issue of safety and service when they discredit and expose directly the champions of deregulation, such as NationAir.
Safety is directly affected by the diminished responsibility of Transport Canada for small community airports. Deregulation, privatization of airports, user pay -- call it what you may, the product is the same: The large centres win; the small communities lose.
The airline spokes of the mega-city hubs all originate in small communities, but everyone seems to be oblivious to the reality that, if you remove the spokes, the hub may also fail.
The Pembroke airport has been a spoke of the Toronto hub for 28 years, but now our financing is terminated and our fees in Toronto increased. Some of the former $60 million profit of Pearson airport was channelled back to Pembroke previously by Transport Canada, but now there is no payback. The greed of the city is satiated. No matter that a 28-year-old service fails, the marketplace philosophy triumphs; Toronto has all the cards.
This is not a diatribe at Toronto; it just means that big markets win everything and little markets lose.
Finally, the most negative fall-out of deregulation has been the transformation of Transport Canada. The federal ministers, politically concerned that the negative results of deregulation would become apparent to the public, demanded that Transport Canada, with reduced resources, stem the tide of declining air safety.
As a law student, I was taught by a world-famous visiting administrative law professor that governance in a highly sophisticated society was done by education and licensing to maintain standards. This prevented the breach of law in advance. In primitive societies, the threat of punitive criminal sanctions with severe penalties for failure was the legal last resort.
I have observed the ugly metamorphosis forced on Transport Canada for 30 years. Thirty years ago, Transport Canada had highly experienced, user-friendly personnel who were willing to advise and guide in all matters. They were magnificent. I am one of the few still around who can testify to that fact.
Today, it appears that they have retired and been replaced by less-experienced personnel who live in constant fear of being personally sued civilly or publicly discredited for the inevitable failures that flow from the blind insistence of their political masters on marketplace philosophy. They dare not give advice or even interpret their own regulations. The trust and integrity that we used to know have disappeared as the industry is gripped with a cruel, paralyzing fear. It is no fault of the employees of Transport Canada. They, too, are victims of the system.
Finally, as a lawyer, I must state that there is no such thing as absolute deregulation. It is all a matter of degree. We will always have the rule of law in our economic life as we do in our political and social spheres. Most particularly, aviation, like medicine and criminal law, is a discipline where safety concerns must be foremost, and economic consequences must play a secondary role. Economic laws of the marketplace must be amended accordingly, or our great Canadian record of air safety will be lost.
Our friends in Transport Canada must once again become trusted educators and not feared policemen. Our vision of aviation should once again be restored to many of its pioneer objectives, namely providing service within Canada, to even its remotest communities, as opposed to flying Torontonians cheaply to Miami. If our present vision does not change, our "open skies" will carry only foreign-owned aircraft, and the issue of safety will be vested in foreign jurisdictions.
Senator Bacon: You have mentioned airline deregulation, and the fact that we are now two years into Open Skies with the United States. You seem to feel that these two developments combined have had a negative effect on safety. Did I understand you correctly?
Mr. O'Brien: Absolutely. I made predictions 10 years ago as strong as these. I am a believer in free enterprise in all its aspects, but to impose the marketplace philosophy on air safety is just irresponsible. When it comes to Open Skies, I predict that our skies will be owned by American aircraft operators, and the issue of safety will be determined there. I cannot understand why we pursue this policy in the face of the evidence. I think it impinges directly on air safety. I have expressed that in the last 10 years. I have watched other Canadian operators. I have seen what they have done in terms of compromising air safety, and I have been grossly disturbed as I witness them go down one by one.
Senator Bacon: Which practices changed that affect the safety and the reliability of the aircrafts? Do you feel the Americans are less concerned with safety than we are?
Mr. O'Brien: Certainly they are. One need only consider the whole Valujet experience and look at the manifests. They did not know who was on the airplanes when they went down. Our employees just laugh every day at what is tolerated in America, but the public does not know. Transport Canada officials try to cope with this.
Quite frankly, it is a big cover-up. I read the nonsense in the press, repeated time and time again, that deregulation leads to more competition and cheaper fares. Senator, the evidence is just the opposite. How long do we have to put up with this? I am not asking for full regulation again. I said before that we should only regulate, possibly, the small communities. Deregulation works in the big mega-cities with the huge markets, but it does not work in Wawa or Hornepayne or wherever.
I asked last time that communities under 100,000 be exempt. They did exempt the north, and everyone up there is still flying. Bearskin has been able to expand. However, everyone but us in Southern Ontario has gone under. We struggle. I went to communities like Gatineau where they had the wisdom to say, "We will impose regulation. We will not let anyone else in here if you come in." They honoured that obligation. That is the only reason I could go to my bankers and ask them to back me.
Senator Bacon: Certainly, when we compare the situation here with what has happened in the United States, we do not have similar incidents here.
Mr. O'Brien: NationAir's record is as bad as anything in the United States, in my opinion. Its record is deplorable. Everyone looked the other way. I read every page of the report and shook my head, as an operator, wondering how that could happen in this country. It is a disgrace.
Senator Bacon: You feel Open Skies is part of the problem.
Mr. O'Brien: It is all part of the same problem. Anybody who walks down the road, if he can stagger in, can get a licence. If the Air Transport Committee decides that Greyhound is a farce, being owned by Americans, the cabinet reverses their decision. This is all to serve consumerism which is the new religion in our society. All that matters is the cheapest price.
Senator Bacon: Consumers are where the pressure comes from.
Mr. O'Brien: Politicians only respond, but let us talk about the evil in the system.
Senator Bacon: You seem to be concerned that, with the increased competition once again in the airline industry, our carriers will be cutting back on maintenance and repairs in order to cut costs. Could this lead to safety concerns?
Mr. O'Brien: How can my little airline possibly compete against an American carrier that is prepared to subsidize its Canadian operation from its American profits until I am out of business? Any mathematics professor can explain that equation to you in two seconds. It is a fact of life. Why do we turn our minds away from the obvious? I am now 62 years of age.
Senator Bacon: That is young.
Mr. O'Brien: Well, I do not care anymore. That is why I am so outspoken. The last words my son -- who is managing Pem-Air -- said to me before I came down here were, "For heaven's sake, Dad, do not overstate something and get us in trouble."
As I say, I do not care anymore. I am happy to say that we have survived, and it is a miracle. Transport Canada will say that our survival is unique. Thirty years ago in this business, when we had a problem, Transport Canada would fly up to help us with it. Now they say, "Do not call us and do not even talk to us about it." For god's sake, we never even made the phone call.
Pardon me. That is unparliamentary language.
I had to live with this scenario in a small town where I could never speak back. That is why I am so grateful for this opportunity. We have seen silly editorials saying that some day we will all be flying to Florida for $49; they create a distasteful and ridiculous illusion. If that is the case, every airplane will fall out of the air before it gets off the end of the runway.
Senator Bacon: With the devolution of airports to local authorities, do you feel proper steps are being taken to ensure that safety is maintained?
Mr. O'Brien: They cannot.
Senator Bacon: You feel they cannot.
Mr. O'Brien: At a small airport, our pilot tries to find out if at the last minute he can land or whether there are any clouds, and he has to over-fly it and come back.
Senator Bacon: Is that because of the devolution to local authorities?
Mr. O'Brien: Absolutely. You cannot abandon these small communities. Why did the government take Toronto, which had a profit of $60 million, and give Pembroke a little shed? Why did they build palaces in Toronto for which they now charge us outrageous prices? I can say that; I have flown into Toronto for 28 years.
Now we have a group in Toronto which has very little knowledge of the industry, as indicated in a meeting a week ago. The situation has gone from bad to worse. There is a philosophy of no governance in the system. We are talking about air safety.
When you get to hospital, you do not walk in and say, "I need a heart bypass, so who is the cheapest surgeon"? Would you go to 35,000 feet in my aircraft over water and in the middle of the night with the cheapest mechanic or the cheapest pilots available in the industry?
When I think of our legal system, we can invest $100,000 in a trial for a simple criminal. That is a tribute to our system because we believe it is important. Well, air safety is important as well.
Senator Adams: I come from the Northwest Territories, and it sounds like you are operating the same way as people who operate in the Arctic.
You are concerned about Transport Canada. It looks to me as though some airlines are not doing too badly because they have connections to the bigger airlines, such as Air Canada and Canadian. Do you do the same thing? Do you have connections with those airlines, or do you fly only to small, remote areas?
Mr. O'Brien: I can speak on this subject because we have been feeding both Air Canada and Canadian continuously for years. We have interline fares with both of them, and I do not know of any other carrier that does. We had the political sense to deal with both of them wisely. They trust us. They know that we will not go head on with them in any market. We are handled by Air Canada in Quebec City and by Canadian in Toronto. We deal freely with both of them. We have interline fares with both of them, and we feed both of them.
However, in Canada, that is no benefit at all. In the United States, they give you free terminals, free passenger handling and everything else. They invite you in. In Canada, they do not. They charge you top dollar.
Senator Adams: Do they charge you landing fees as well?
Mr. O'Brien: Yes. We pay them to handle our passengers on through-fare tickets. There is no benefit at all.
Senator Adams: That is why they can charge $49 to go to Florida.
Mr. O'Brien: We are a commuter serving small communities all over Ontario and in parts of Quebec. You do not have to fly everyone. What is critical is that we fly the key individuals in that group.
American studies indicate that for 200 people employed, you fly three kinds of people. That is essential. Generally it is the president, the chief sales officer and the financial advisor in every company. I do not have to fly everyone in Pembroke, but I absolutely have to fly the people from AECL who run a world class lab up there. I have to fly the senior officer from Camp Petawawa. They absolutely have to fly. I have to fly the executives of MacMillan Bloedel. It does not matter about the rest. I will fly them when they have a funeral to attend or there is a medical tragedy. The rest of them will go by bus, but I have to be there for those essential services. That is important. Without that service, you cut off these communities and they die.
Senator Adams: Do you have scheduled flights?
Mr. O'Brien: Everyone of our flights is scheduled. We have 28 flights a day. We do nothing else but scheduled flights. We have the odd charter, but the emphasis is strictly on scheduled service. I am pleased to say that our level of completed flights is 98.6 per cent, right in the range of Air Canada's rate. That is up in the north in Hornepayne and Wawa where our planes fly in and out at temperatures of 50 below zero.
Senator Adams: We deal in the North with what we call the Arctic airport. I think it is still run or funded by Transport Canada. Some of the runways in our communities have to be maintained 24 hours a day because we sometimes have medi-vacs coming in to the hospitals. There are no highways. You are saying that sometimes you cannot even get a hold of someone to clear the runway.
Mr. O'Brien: Our pilots do not know until they are in their final approach. This is only recently, since all the support has gone.
Earlton is a federally run airport. The federal government is pulling right out. The pilot must make a last-minute judgment and sometimes circle. There is no money, but this is an essential service, in my opinion, in these remote communities. It is not essential for us to go to Florida.
I will be going to Florida in a week or two, and I could easily go some other way. It is not mandatory. However, this service is mandatory for our legal system in Pembroke. The Supreme Court judges sit there and they all use our service. Otherwise they will move to Ottawa, and all the witnesses will have to come to Ottawa.
Senator Adams: What about the automated weather stations? Are they working yet in Northern Ontario? Are you able to phone for forecasts?
Mr. O'Brien: I am not an expert in that area, but the system has not been well received.
Senator Bacon: Are you referring to AWOS?
Senator Adams: Yes, the AWOS. You do not believe in it?
Mr. O'Brien: It is all part of the general picture. We pioneered aviation in this country. We had a magnificent air transport system, and now we are just rolling up the carpet inch by inch. It is a tragedy. It is all being done in the name of this marketplace philosophy.
I keep referring to this because it impinges everywhere, whether you are privatized or user-pay. What happens is that the big towns get it all and little towns lose everything. Is that our vision of Canada? If it is, it is a tragedy.
The Chairman: Mr. O'Brien, on page 7 of your brief, you talk about safety and make the point that the greatest single threat to safe operation is the financial crisis. Before this meeting formally started, I said that my greatest fear was always faced in the bank manager's office. I could not agree with you more.
Could you be a little more specific about how a pending financial crisis impacts on safety? Does it show up in the level of maintenance? I remember building batteries and building pucks so that we could fly airplanes in the morning. They always flew safely, although I sometimes wondered about it.
Could you lead us through this a bit? Does it show up in maintenance hangers?
Mr. O'Brien: Anyone who knows anything about the industry knows that the major question is between the airline accountant and the chief maintenance man. There is a contest there every day. The minute the chief maintenance sees a sign of wear on anything, his first instinct is to renew it immediately. Why take any chances at all? This impinges directly on the accountant who is trying to maintain a reasonable bottom line.
The issue is there every single day in every consideration of the airline -- safety, renewing the unit. People run their cars until they quit in most cases. In the airline, you take off the tire when it looks perfectly good and throw it away because it has flown the allotted number of hours. If the mechanic knows that a particular tire has experienced a particularly hard bump or something, he should take it off immediately and throw it away, even though it has not flown the allotted hours.
That is a judgment call to be made every day. Safety must be considered every day. It is directly connected to economics and the minute you impair that, you give no security to the airline.
We went into Hamilton after Canadian withdrew. We did not miss a single flight. They advertised us and our flight numbers. We carried on. Within two months, another carrier, Laurentian Air, came in and started to bracket us directly. We also got into this nonsense of under-bidding and a price war started. After a short period of time, I withdrew. I do not play those games. It impinges on the integrity of our operation.
At one point, Air Canada begged us to take over Laurentian's maintenance. One of their doors came off in mid-air. I could tell you the whole story, but that part was so public that they could not hide it. Max Keeping used to talk about looking for the door somewhere around Ottawa. Laurentian drove us out of Hamilton, and there has not been a service since.
We went to the Hamilton airport and asked for some guarantee that, if we went in there and made a big investment in service, they would give us some protection guarantee. They wanted to do it, but that was a Transport Canada airport and they could not.
The Gatineau airport is owned by the City of Gatineau. I told them that I would go in there if they gave me service. They said, "Just make out the contract." We have been flying ever since and providing excellent six-flights-a-day service there. That is because they have imposed the regulation.
No bank will give you 10 minutes in the silly scenario under which we are currently working. Let us do it for the small communities. Let us take another look at it, as we have done in the north. There would be nothing up north without those guarantees. Bearskin has done very well because most of their work happens to be above the line that was drawn.
We were in the maelstrom in southern Ontario. They were going down right, left and centre, and everyone was taking a shot at us. I am bitter. We survived, but part of the reason we survived is that I am a lawyer and I make my income elsewhere. I ran this operation for nothing for years. I served the community, and there is a certain value in that, although I am not making myself out to be a hero.
The Chairman: As cutbacks continue, the question of the level of inspection by Transport Canada comes up more and more often. Could you comment on the level of inspection from your perspective as a regional carrier? Apart from deregulation, have the cutbacks within the realm of government spending affected inspection to the degree that you might see an impact on safety?
Mr. O'Brien: I do not wish to criticize the employees of Transport Canada. They do extra work on a regular basis. However, we are always pressured. If you want to have a pilot trained, it takes weeks to get an appointment, although you need him tomorrow. If you want to have a plane inspected, you must wait for weeks. This costs a fortune.
The Chairman: In the meantime, you cannot use that piece of equipment.
Mr. O'Brien: You cannot move it.
The other thing that annoys me is that if you are an honourable operator, as we are, as Transport Canada knows, it costs a lot more.
The Chairman: How would you correct that? Is it a question of more funding for Transport Canada for the purpose of hiring airworthiness, engine and pilot inspectors?
Mr. O'Brien: I have tried to point out in this brief that the fundamental problem is that you are trying to make them do a job they should not do. There should be a process of education and licensing. You will recall that I talked about the spectrum. Educated and civilized countries train their doctors. They do not need a policeman in the operating room to ensure that everything is done right. They train them in advance. You train all your professionals. It is a question of education and standards and the maintenance of them.
That was the philosophy under which we only gave you a licence if you could prove you were worthy of it. Now, we will license anyone who can crawl into the licensing bureau. They start off with no experience.
Look at Arrow in the United States. They gathered personnel together in a couple of weeks and started an airline.
It is impossible for Transport Canada to police that. It is not for the policeman to set the standards in our society. The standards come from another source. Consumerism is the fundamental flaw in the aviation industry and I am sick of it. You cannot fly people for nothing.
The Chairman: I agree with you.
Mr. O'Brien: Then we blame every problem on Transport Canada.
The Chairman: With regard to the test for new entrants into the business, have you had, over the years, an opportunity to watch it change? Are we allowing people to get into the air when they are not ready to get into the air?
Mr. O'Brien: Frankly, in terms of the licensing arm, it is of no value at all. What we have done is raise new barriers. In fact, it has been transferred to the insurance companies and the bankers. The biggest singular barrier of all is the entrance to the reservation system. Another barrier is maintenance in Transport Canada, that is, being able to get a qualified maintenance shop. That has become a major hurdle for new entrants, and a wise one, there is no question about that.
However, it has made it very difficult, in some respects, for small operators that do not have the resources. It is all designed for Air Canada. Unfortunately, in this country, we all live under the shadow of Air Canada. We have always got along well with Air Canada, as we have done with Canadian. I think they both respect our little operation. However, at times, they are such a dominant factor, it is like the elephant and the mouse, a parallel which I have heard before.
The Chairman: As have I.
Senator Bacon: How would you re-regulate the airline industry to impact positively on safety? Would you impose restrictions on airlines entering the smaller markets?
Mr. O'Brien: I would have a licensing system for any community under 500,000 where the carrier who wants to get in has to prove it is in the public interest for him to get in. The onus should be reversed, which I think would solve the basic problem. Then the bankers would take another look at it the next day. It is called security of investment.
Senator Bacon: Would you want regulation for the smaller southern Canadian centres, as they have in the north?
Mr. O'Brien: Yes, otherwise you will have no service. Hamilton and Kitchener should have service. We were in there. We were driven out by NationAir. The travel agents said to me, "Mr. O'Brien, we tried to tell people." However, how can you tell anyone to fly with you for $160, instead of for $88 on NationAir? After a few months, they were gone and there was nothing left but debris. Every newspaper in the country touted this new revolution in air travel.
The Chairman: Thank you. Enjoy Florida. We will find a way to get you back here in 10 years.
Mr. O'Brien: It was a 100,000 limit that I asked for ten years ago.
The Chairman: Thank you, Mr. O'Brien.
We will hear now from Mr. Wolfe of Canada 3000.
Mr. Walter E. Wolfe, Airline Safety Officer, Canada 3000 Airlines Limited: Thank you for hearing Canada 3000, Mr. Chairman. I am the manager of flight operation safety at Canada 3000. I am also a line captain and fly a 757 on a regular basis. I can speak more to technical issues than I can to some of the more business-oriented side of the industry.
Canada 3000 is an international scheduled and charter airline, as you are probably all aware, flying to 78 destinations worldwide, with a fairly large scheduled operation in Canada and the United States.
From the point of view of the relative health of the safety side of the airline industry in Canada, we think that the airline industry is safe right now. We enjoy a stable environment, at least at the major air carrier level. It is our job to keep it that way. This is probably something that you have heard, certainly from Mr. O'Brien, as well as from other carriers. We cannot allow a degradation of the infrastructure to impact us on safety.
Regulatory reform in the Canadian aviation regulations have been a significant improvement in the safety of the airline industry in Canada over the old air regulations and air navigation orders.
As you probably just heard from Mr. O'Brien, we do not think it is necessary to have Transport Canada looking over our shoulders 24 hours a day. We also do not want to see a reduction in the oversight capability of Transport Canada. They play an important role in safety management of all the airlines, including ours.
We believe we have a good relationship with the air carrier operations group in Ottawa and Toronto. However, stable funding, or whatever Transport Canada is contemplating for the future of the air carrier group, should be maintained because there has to be adequate supervision of all Canadian air carriers.
I will speak later on about some of the other infrastructure issues. I am not sure if you wish me to speak about some of the technical issues or not, Mr. Chairman.
The Chairman: We certainly do.
Mr. Wolfe: In my job, I work with the National Transportation Safety Board, the NTSB in the United States and other countries, as well as the Flight Safety Foundation. The NTSB did a good job a few months ago by identifying some of the significant safety issues that are to be considered in Canada. From those issues, I pulled some of the ones that are relevant to the air carriers at our level. They include management adequacy and air proximity events, what we used to call near misses.
The Chairman: When you say management, do you mean flight deck management?
Mr. Wolfe: Yes, as well as company management.
The others are controlled flight into terrain, awareness, automated cockpit, and work and rest schedules. These are all issues that the Transportation Safety Board has identified. Management adequacy has been addressed through the updated cars and will be monitored by the air carrier operations group. Therefore, we say that we all benefit from having Transport Canada maintain a strong presence in monitoring the industry on many levels, not just at the safety level but at the management level as well.
Regarding air proximity events, or what we used to call near misses, we know that the traffic growth in Canada and in the world is increasing at a steady rate at the present time. If we are to maintain a safe environment in which to fly our airplanes, we must maintain adequate funding to NAV CANADA and Transport Canada in order to keep up to date on such things as equipment; the Future Air Navigation System, or FANS project; the use of TCAS, updated radar modernization program; and Transport Canada's involvement in global position satellite navigation and air space classification review, to ensure that we have a safe, satisfactory mix of aircraft going into all of our airports.
We know from experience in other countries that it is getting busier and busier and busier. While we know that the accident or incident rate remains stable, it is not at the lowest level, which is where we would like to have it. We know with the increase in operations that we will have an increase in the number of occurrences. To keep ahead of that, we must keep up with the technology that will be available in radar and air space global positioning or those types of things. It is not something in which we can lag behind.
In my personal experience in world-wide operations, when countries or parts of the world allow their infrastructure to degrade to the point where there is poor technical support, we start to see the serious types of incidents and accidents that we can usually avoid in Canada.
Regarding CFIT, or Control Flights Into Terrain, accident awareness, every year, in Canada and around the world, aircraft are lost to this type of accident. The Flight Safety Foundation, along with most carriers, regard this as one of the single largest threats facing modern airlines around the world. Strategies at the airline and regulatory level should be worked on diligently to help avoid and prevent these types of accidents. Equipment and training programs should be contemplated when Transport Canada is working with carriers at all levels of the industry.
The American Airlines accident in Cali involved a virtually brand new aircraft and a very experienced crew. If it can happen to them, it can happen to any one of us. It is the type of accident that we know is preventable, and it will take work at both the carrier and regulatory levels to keep us out of those kinds of problems.
To address more of the technical concerns in terms of safety in the industry in the years ahead, in order to reduce the accident rate to what we would all like to see -- zero -- we must work on the human aspect of the equation. We know that, particularly in Canada, we have modern aircraft, modern airlines, for the most part excellent maintenance and, at the current levels, good infrastructure support, but where we have not been making progress as an industry in Canada or world-wide is in human factors.
We know that most accidents nowadays are still as a result of human failings. Work in automated cockpits, human-computer interface as we sometimes call it, work-rest schedules, all these types of things affect the human being in the industry. I do not just mean in the flight deck, but in the entire industry from maintenance to operations to air crew. That is the type of work that, as an industry and as a regulator, we should be considering.
That is where we will make the progress, in our estimation, in bringing the accident rate down. We know, for example, that the accident rate has come down over almost the last 30 years; however, in the last 8 to 10 years, it has remained stable. We have not been able to lower it below the rate at which it is now. We have addressed the major things, the technology, the maintenance, the reliability, the infrastructure, the training. In order to make further improvements, the regulator and the industry must work on the human aspect of this machine.
There are a few other areas where there could be regulatory help for us, including abusive and unruly passengers. The growth in problems that we are having is almost astounding, not just in our company but in virtually all of the carriers that we deal with in Canada and the United States and, to be sure, in Europe as well. It is an area within which are some grey areas as to what we can do. We do not know precisely what is causing these types of problems, but it is becoming a more difficult problem to deal with year after year.
As a carrier, we would be looking to the government for some help at a regulatory level in dealing with this problem. We think it is primarily a jurisdictional thing. We have an international operation, and getting a handle on this problem will not be easy and will take a substantial amount of work. The Air Transport Association of Canada has been working with all carriers in several different fora in an effort to determine what we can do. However, in speaking to this committee, it would be something that we would like to raise, if it has not been already, as something that, in a regulatory environment, we need to examine.
Getting back to infrastructure again, another thing of concern to us is the contemplated reductions in emergency response or crash-fire rescue of vehicles, equipment, and people. We know it is an emotional issue. We know there are reductions being made in many of the smaller airports. Again, to put it in with the rest of the comments, it is an infrastructure problem about which we are concerned, along with the other technical aspects of radar and air space and those types of things.
We do not, in Canada, want to see a significant reduction in infrastructure to the point where we start to have these problems and then need to bring in particular rules to deal with them. We would rather be proactive than reactive, and we should recognize that all of these types of infrastructure cases are important to maintain the level of safety in Canada that every one of us expects and deserves.
Regarding human resources, I cannot emphasize enough that lowering the low accident rate we currently have in North America will only be affected by all of us in the industry and the regulatory people addressing these human factors. This is a complicated task. Any further recommendations or regulatory legislation contemplated should address these areas. Areas of crew resource management, work-rest schedules, human, computer and automated flight deck are some of the areas where we should be working as an industry and as a regulator.
We know that terrorism is on the rise. Worldwide security is another significant area on the technical side of things which we want to examine. Resources for training and screening of staff employed in this area are important, as is continuing to have the RCMP or CSIS involved at a federal level for the security of all our carriers.
Police forces are being reduced at all the airports in Canada and services are being contracted out or devolved to other areas. From a technical point of view, from a security and safety side, we want to keep an eye on this to ensure that we have adequate coverage at all of our airports and that there is proper screening of those people who are coming into the airport and proper training of all the employees. This is where we have the potential of running into some problems.
In summation, in the airline business, especially in the safety business, the devil is in the details. The Canada airline industry is very safe and we want to keep it that way. The infrastructure must be maintained at many levels to ensure that we have a continued improvement in the safety record and that we have a safe and stable environment in which all of us can work and fly.
Senator Bacon: Would you say that, since deregulation, safety has become a bigger issue?
Mr. Wolfe: It has become a more visible issue.
There is no doubt that you can quantify the introduction of competition. Whenever financial pressure is placed on any company in the public transportation industry, you can certainly say that there is the potential for safety problems to become more problematic and to be brought more to the forefront.
I believe that the industry is safe in Canada on the technical level. We have a good, solid, safe industry in Canada and we do not want to lose sight of the fact that it could be impacted by cost cutting not at the carrier level, but at the large air carrier level. I have confidence in the major carriers that are currently operating in the country. We see companies such as Canadian Airlines in severe financial difficulty, yet that is a safe airline on which to fly. I would not hesitate to put my family on their airline or on Air Canada or on our airline.
When you are dealing with safety, there is always the potential for financial impact. If the industry is supported with the proper infrastructure and allowed to be healthy -- and, again, this involves Transport Canada maintaining a substantive effort to keep an eye on everyone -- then we will not be in the same position in which some countries are finding themselves.
Senator Bacon: How do you satisfy yourself that the airline industry is not cutting back on costs which will affect safety? Are there any ways to do that?
Mr. Wolfe: It is difficult to speak for carriers other than my own. There is an old adage -- and any responsible carrier must realize this -- which states that if you think safety is expensive, try an accident. There is no percentage in making your airline so unsafe that you have an accident. It will end up costing all of us a lot more than our jobs.
The safe operation of your airplanes must be the most important thing that you do. If you cannot do it safely with the economics that are in place, then you should not be doing it. There is no doubt about it. It involves a large, complicated effort.
As I said in my notes, the devil is in the details. We can buy or lease new aircraft and have the best people available for training, maintenance, air crew and support, but if you do not pay attention to the details of your operation at all times, that is where there is potential for getting into trouble.
Senator Bacon: Does your airline have any testing for substance abuse or drugs?
Mr. Wolfe: If you are talking about random or spot testing, no. How do we make sure that our employees are not abusing drugs? Our air crews are required to go through medicals every six months. There are ways of telling. We try to run an effective safety management program. We know that the 1,200 or 1,500 people who work at our company are human beings and we will have our fair share of people who get themselves into difficulty. We must maintain a corporate culture that understands that people occasionally need help in this area. First and foremost, you must take them off service and help them out. Our company is only 10 years old, so we have yet to have a problem in that area. However, the reality is that they are human beings and we know there will be problems in that area.
To answer the question specifically, no, we do not have spot testing.
Senator Bacon: Do you have any prevention measures such as education and information?
Mr. Wolfe: In our human resources and flight safety management programs, we maintain an awareness that these problems exist and provide company medical people to give advice to all our front-line employees on the operation of the aircraft for these types of problems. However, there is no spot testing.
The Chairman: You do not have a zero-tolerance policy for on-duty use?
Mr. Wolfe: Yes, we certainly do have that policy. That is reflected in our operations manual and in every way we conduct our business.
The Chairman: When you say "zero tolerance," are you nice people or are you safety people? Do you say, "Go home and sober up and we will give you some treatment?"
Mr. Wolfe: If we were ever in the position of finding someone under the influence of any kind of alcohol or drugs or whatever, they would be taken off-line and they would be helped. It is not in our interests to make people want to hide these types of problems. Again, we have not had to deal with it yet. We have not run across a situation where any crew member of ours has ever been in the position of operating an aircraft under any kind of influence. If we did, our policy would be to remove them and to help them.
Senator Adams: Your airline company provides charter services. Do you have a partial interest in Air Canada so that you have a connection to their passengers?
Mr. Wolfe: No, we are an independent airline with international flights, scheduled flights and chartered flights. Scheduled flights are within Canada and the United States, and chartered flights go into Europe, Mexico, the Caribbean and beyond. We have no inter-line agreement with any other carrier. It is strictly in-house.
Senator Adams: Besides passengers, do you ship any other products or cargo? Do you have cargo services?
Mr. Wolfe: Yes, senator, we carry cargo world-wide, in limited amounts due to the size of our aircraft on international flights; however, we do have a cargo department and we do sell cargo space through a company that we control.
Senator Adams: One hears of people shipping engines for a Rolls Royce automobile. However, you transport all types of cargo, including food?
Mr. Wolfe: As a carrier, because of our size and structure, we will not accept many things. We do not solicit the same type of cargo business as would a dedicated charter or cargo carrier. We will not carry shipments of dangerous goods or hazardous materials.
We only accept general cargo that we can easily carry and monitor. We do not have the capacity to carry large shipments of those types of things. Primarily our shipments originate from the Caribbean and Mexico, such as fruit and vegetables. We ship general cargo within Canada, Canada Post, quite a bit, and, to smaller extents, general cargo from Europe and the Far East.
Senator Adams: As a safety issue with cargo, what are the procedures taken to prevent the implantation of a bomb or some other device inside the cargo being shipped?
Mr. Wolfe: That is a good question.
Senator Adams: In particular, I am directing my question with regard to situations such as the African airline that was hijacked last year with weapons that had been stored in the catered food. How do you handle that?
Mr. Wolfe: That is a good question which specifically speaks to a couple of issues I raised, specifically cargo.
We have an in-house cargo department called the Inline Marketing Group. They are the division of our company dedicated towards cargo. You are absolutely correct that security of cargo is a big worry on a world-wide operation. How does one get a handle on dealing with it? One of the few ways we can avoid mishaps is by dealing with known shippers.
In other words, when we are accepting cargo shipments from places in Canada or anywhere in the world and because the nature of our operation is world-wide, we must be able to deal with known shippers.
Our air cargo marketing group sets up their operation to accept shipments only from known shippers and known freight forwarders. We do not accept ad hoc shipments from people. We do not accept shipments from suppliers that we do not know or do not deal with on a regular basis.
Of course, when we deal with freight forwarders from the Caribbean or anywhere else we go, there is an audit in place to ensure the cargo is properly packed, documented and that sort of thing.
In speaking about security, if the airline industry is vulnerable anywhere to a bomb or some kind of terrorist act, that is where it is vulnerable. I do not think anybody really believes that it is likely that anybody will carry a bomb onto an airplane, through security and that kind of thing.
After something like the TWA 800 crash happens, we, as an industry, tend to ratchet up security on little old ladies. However, as you said, where there are security breaches, it is generally because you have been targeted and it is an inside job by people on the payroll or by companies who work for you.
That is why I mentioned earlier in my notes that it is important to have, in security, adequate supervision and screening of employees who work both for us and for our contract people. We need good screening, security and supervision in Canada by CSIS and the RCMP. It is in this area that we are vulnerable.
If we are targeted, as was Air India and the Canadian Pacific Airlines, in 1985, you will find that that is likely how these terrorist devices get on the airplane. This ties in with what I said earlier about security. We cannot let our guard down, literally and figuratively, with security in this country. We must keep a close watch on it.
Senator Adams: We have a funny kind of security system in the Northwest Territories. We have a sceening system for passengers. For example, if I go from Rankin Inlet to Iqaluit, Frobisher Bay, I do not even have to go through the screening. If I go from Rankin Inlet to Winnipeg, I have to go through screening.
I am sometimes a little bit afraid, if someone wants to bomb a carrier, what is the difference between the flight from Rankin Inlet to Iqaluit and Rankin Inlet to Winnipeg?
Mr. Wolfe: You are right. This goes to a whole broader spectrum. In safety regulation sometimes, and probably in Canada, too, we tend to be guilty of looking at smaller carriers, regional, commuter or third-tier carriers, and suggesting that the standards applied to those carriers, and therefore the passengers who fly on them, are not as stringent as the ones that are applied to my airline, Air Canada or Canadian. That is wrong.
A passenger who buys a ticket on a Canadian common carrier expects and deserves the same level of safety and security from the smallest carrier right through to the largest. Small carriers are no less vulnerable.
The industry is just taking a risk. It is the old risk management thing. They are asking why anyone would target a small commuter airline flying between two points in Northern Canada. They say it is not a high profile flight and, if someone is looking to commit a terrorist act, they will look for something big.
Nonetheless, the principle of the regulation should apply not only in security but in the whole third-tier commuter industry. That is something the Americans are going through, after a few significant accidents at the third-tier level. They are finding out that small aircraft are not certified to the same level as large aircraft, do not have the same safety equipment, are not expected to have the same training, yet they are part of the same flag-carrier system as ours.
Senator Adams: I know your airline is not as big as Air Canada, but how about your ground crew? If your flight comes from Toronto to Ottawa, do you have a contract with Air Canada to look after your aircraft safety?
Mr. Wolfe: We contract different people around the world. In Canada, for ground handling, we largely do our own ticketing and ground handling. In Canada, we have our own company that does that. We have our own Canada 3000 airport services. As far as baggage handling, aircraft push-back, things like that, we contract out to Air Canada, Canadian Airlines or Hudson General in Canada. In the world operation, it is a known contractor. In Hawaii, it is Aloha Airlines. In the United Kingdom, it is the local service provider.
Senator Adams: If you are flying between here and Toronto with a connection to Air Canada, and you have some mechanical difficulty, would you have an Air Canada crew or mechanics that would be able to treat it?
Mr. Wolfe: Again, we either have our own maintenance people or contract maintenance people. It is not necessarily Air Canada. In fact, it is rarely Air Canada. In Canada, we have our own maintenance people at every place that we fly. Where we do not have our own maintenance people, we have contracts. For example, in Mexico, it is with Mexicana Airlines. In Hawaii, it is with Aloha Airlines. Those people are trained to our standards. They are monitored under our maintenance manual.
The Chairman: How many aircraft do you have in your fleet now?
Mr. Wolfe: We now have 15.
The Chairman: What is the mix?
Mr. Wolfe: We have nine Boeing 757s and six Airbus A320s.
The Chairman: Do you have your own maintenance facility?
Mr. Wolfe: Yes, we do.
The Chairman: So you do your own quality control and checks and everything else?
Mr. Wolfe: We certainly do.
The Chairman: So all your engineers are fully competent to sign out? Are you at the level yet with Transport Canada where an individual working on a piece of work is able to sign it out themselves? Or do you still require an overriding engineering authority to sign it out?
Mr. Wolfe: I am not sure I could answer that from a technical point of view, from the maintenance side. I know we are an approved maintenance organization. That is about the highest level. Like some other airlines, we do not have the capability of doing some heavy checks in-house. Some of our very heavy maintenance checks will be contracted out, primarily to Monarch Maintenance in England.
The Chairman: You send your engines back whence they came?
Mr. Wolfe: Yes. We do engine changes, but if there is anything significant like that, they will be shipped out. We do not have an engine shop that does tear-downs and that sort of thing.
The Chairman: Do you have a tire shop?
Mr. Wolfe: Yes.
The Chairman: Do you do some of your own retreading?
Mr. Wolfe: We do not do retreading. It is strictly build-ups and replacements. I do not think we would be doing anything like retreading.
The Chairman: Do we create a demand for aircraft by building more and bigger and better and cheaper and faster and quieter and cleaner aircraft? Or do we build these aircraft in response to the demand?
Mr. Wolfe: That is a good question.
The Chairman: I ask the question because we are told -- and it is scary -- that in less than 15 years, there will be a major hulk lying beside a runway every 7 days somewhere around the world. When we talk about safety of Canadian passengers, we are presently doing well. There is no question about that. I do not even bat an eye about getting on a clunker. It will be safe here in Canada. However, I worry very much the moment I get to Burma.
Mr. Wolfe: As I mentioned earlier, that is my point, too.
The Chairman: Do we really have to go offshore to find that extra 5 per cent or 10 per cent safety margin?
Mr. Wolfe: No, we do not have to go offshore. What we must do, if I understand your question correctly, is address the human factor in this equation.
Modern technology has brought us a long way. We have marvellously safe aircraft built here, such as De Havilland Dash 8s.
Most of our major carriers fly very modern or, if not modern, certainly well-maintained aircraft. We do have to keep up with technology.
The point you make about having a major hull lost somewhere in the world every week was the point that I was making earlier: While the accident rate per 100,000 hours is low, we will have many of those hundreds of thousands of hours in a few years; and while we will be able to quote a nice statistic that says it is only 3 per 150,000 hours, that may mean there is one accident per week because there are several million hours of flying every year. Then it will be hard to impress upon the public that the industry is safe because they may pick up the paper and see a major airline lost every week. Yet we will be saying that the rate is still only 3 per 150,000 hours as it was 10 years ago.
We have recognized in the industry for a long time that we have brought the rate down, but because of the growth in the number of hours flown, we will have a higher number of accidents. We have wrung out as much as we can from technology. The only way to make headway in bringing down that number is in the human factor. We must deal with issues such as human-computer interface and cockpit resource management. That should extend right through to company resource management, the way we deal with all employees in our company, to make the corporate culture of every airline in Canada and, hopefully, in the world a safe corporate culture.
To get to that point where people are truly putting safety first and thinking about having a safe corporate culture, we must do more than just say these things. We must actually work at addressing these human factors. How do we design work-rest schedules? Do we fund research into human-automated flight decks?
The Cali example is an excellent case of a pilot for a world-class airline in a brand new airplane, with 60 years of experience in that cockpit, and yet flying into the side of a mountain in good weather. Those are the types of accidents that send a shiver down all of our spines. American Airlines is not a fly-by-night operation. If they can do it, anybody can do it.
How do we get everyone out of that particular boat? It is by dealing with the human side of the equation. If we are to make strides in safety in the industry and not just in Canada, that is where we must put our concentration. Again, it all falls back to infrastructure -- security, training and support from Transport Canada, and so on.
We would likely all agree that we have a marvellous safety record in the airline industry in Canada, even when people falter. I know there are examples of bad apples and bad cases and we all know about them, but perhaps the failing there was in the fact that the infrastructure did not catch what it should have caught.
The Chairman: Perhaps one of the nets that we could throw out to catch a lot of this stuff could well be a new Aeronautics Act. The present one is 60 or 65 years of age. We have kept it going by ad hoc treatment of issues as they have arisen. Those issues are now flowing all over the table with a totally inadequate structure to hold them together.
Mr. Wolfe: Yes.
The Chairman: You mentioned time management, hours of work and rest periods. Anyone who has read the old act readily understands why some of these problems are there.
I commend you for your operational safety. We share your view that Canadians fly pretty safely. We would like to keep it that way and I am sure you would as well.
Mr. Wolfe: We certainly would, Mr. Chairman.
Senator Adams: With the Open Skies policy, the Americans will be taking over some of the smaller airlines. You have no difficulty with that, do you?
Mr. Wolfe: I would like to see the Canadian airline industry remain Canadian. In my 20 years in the airline industry, I have worked outside the country. I have worked in the Caribbean and the Middle East. There is no better place in the world to live or work than in the Canadian airline industry. In my estimation, virtually no one does it better than we do, and we ought to be proud of that.
I do not like to see the Americanization of the Canadian airline system. I think our system will only be worse if we allow it. That is my personal point of view.
Our carriers are world class. We have a big country with many challenges in front of it from a transportation point of view. I spent many years in the bush in northern Canada. Before I got into flying large airplanes, I flew DC-3s and Twin Otters. We have a tough environment in Canada, but we do very well. The Americans do not do things as well as we do. Their best is not as good as our best, and any dilution of the Canadian airline industry is a net loss to all of us.
Senator Adams: At one time, foreigners were limited to a 25 per cent interest in Canadian enterprises. Is it up to 100 per cent now with free trade?
Mr. Wolfe: I think it is still at 25 per cent.
Senator Adams: We are 30 million Canadians compared to 250 million Americans.
Mr. Wolfe: We all recognize that this is a worldwide industry and a worldwide business. We must be able to compete. We are somewhere between parking all of our airplanes to ensure that no one has an accident and the anarchy that is the Russian airline industry. We want the best and we have come very close to achieving that. However, there are areas where we can improve.
We do not want to see a degradation of our infrastructure strictly on the basis of turning things over to make profit. At a major air carrier level, we are less affected than the Pem-Airs of this world because Toronto, Montreal, Halifax and Vancouver tend not to be affected adversely by cutbacks to infrastructure.
Having flown in the North for many years, there were significant problems, as the Dubin inquiry and the Moshansky commission both pointed out. However, we have continued to make improvements in our system over many years. Justices Dubin and Moshansky have made recommendations and worked to make things better, and I would hate to see that backslide simply to reduce costs and reduce infrastructure.
We must strike a balance between our ability to operate and compete in the world, which we must do, versus the Americanization of our industry. That is where we are headed. We are not being taken over by the French or the British or the Germans. The impetus is coming from the United States. In my estimation, that is not a desirable thing.
Senator Adams: Has any other company offered to buy a percentage of your company?
Mr. Wolfe: Our company is 100 per cent Canadian owned by a man in Calgary, Alberta. His resource funding corporation owns 100 per cent of the company.
Senator Adams: Is no other company offering to buy 25 per cent of Canada 3000?
Mr. Wolfe: You never know. It might be different come Monday.
The Chairman: We have heard about serious difficulties arising from the distribution and sale of bogus parts. Is this an issue for your company? If not, how do you ensure that it remains that way?
Mr. Wolfe: I do not think it is an issue. We, along with other Canadian carriers, maintain a tight quality control on where we buy our parts. Our engines are built by Rolls Royce and CFM. We are getting new Airbus planes this year. These are the big ones with General Electric engines. Again, it comes down to using suppliers and reputable people that you know and trust. If you go to "Joe's Airplane Parts Company" in Miami, you will probably end up with bogus parts. My company would never tolerate that, nor would any reputable Canadian carrier that I know.
I have read about cases where bogus parts have made it into the Canadian airline industry by a very circuitous route. Somehow or another, they do get into the country. I think that is something our quality control people would have to watch closely.
Again, I cannot speak about how our maintenance department does it exactly, but I am confident in knowing how they deal with their suppliers. They do use legitimate and reputable suppliers for parts.
The Chairman: Thank you. It has been a privilege.
Mr. Wolfe: Thank you for having us. I would like to put a word in for the CARAC group. This consultative process had been good. I am glad to see that it is expanding to committees such as this one. The industry welcomes that development, but there is work to be done. There is no doubt about that.
The Chairman: We will keep slogging away.
The committee adjourned.