:
Thank you, and good morning, everyone.
Welcome to the Standing Committee on Transport, Infrastructure, and Communities, meeting number 44. The orders of the day are pursuant to Standing Order 108(2), a study of issues related to the Air Canada Public Participation Act.
Joining us today from Air Canada we have Michel Bissonnette, Joseph Galimberti, and Louise-Hélène Sénécal. Welcome.
As always, we'll have a brief presentation from our guests and then we'll move to questions and answers.
Please begin.
:
Thank you, Mr. Chairman.
Honourable members, we are pleased to accept this committee's invitation to talk about Air Canada's aircraft maintenance operations.
My name is Louise-Hélène Sénécal and I am assistant general counsel at Air Canada. I have been with Air Canada for nearly 22 years. I am accompanied by Mr. Michel Bissonnette, Senior Director, Engines and Airframe Maintenance, and Joseph Galimberti, Director, Government Relations. Allow me to provide the following by way of background.
Since October 2004, Air Canada no longer operates on its own all of the aircraft maintenance functions it once did. Air Canada's Plan of Compromise and Arrangement under the Companies Creditors' Arrangement Act resulted in Air Canada becoming a wholly-owned subsidiary of ACE Aviation Holdings Inc.
At that time, Air Canada's technical services division, or ACTS as it is also referred to, was spun off as a separate entity owned and controlled by ACE. In effect, the former maintenance division of Air Canada was divided in two. The airframe, engine and component maintenance operations were spun off to ACTS while the line maintenance operations were retained by Air Canada.
The 2004 plan of compromise, which was the basis for Air Canada emerging from insolvency protection and continuing to operate, was implemented following a creditor vote and was sanctioned by the court under the Companies Creditors' Arrangement Act. All of Air Canada's unions, including the IAMAW, the International Association of Machinists and Aerospace Workers, voted in favour of the 2004 plan, which included the spin-off of ACTS.
Since that time, Air Canada itself has gone public and ACE's interest in Air Canada is now reduced to a minority interest. Also, in 2007, ACE sold ACTS to private equity interests. ACE no longer holds any ownership interest in this company.
ACTS changed its name to Aveos in 2008. Air Canada and Aveos are parties to certain services agreements by which Aveos is the exclusive supplier to Air Canada of maintenance services, other than line maintenance, for airframes, engines and components. Aveos operates out of various bases including maintenance bases formerly operated by Air Canada at, among other locations, Montreal, Mississauga—or Toronto—and Winnipeg. Air Canada also operates its own maintenance bases at, among other places, Winnipeg, Toronto and Montreal to perform line maintenance.
In 2009, Air Canada spent a total of $944 million in aircraft maintenance. Of that amount, $659 million, or approximately 70%, was spent on aircraft, engine, component and line maintenance services performed by Aveos or Air Canada at maintenance bases located in Montreal, Mississauga and Winnipeg.
For the first nine months of 2010, Air Canada spent $648 million in aircraft maintenance. Of that amount, $462 million, or approximately 71%, was spent on aircraft, engine, component and line maintenance services performed by Aveos or Air Canada at maintenance bases located in Montreal, Mississauga and Winnipeg.
I would like to conclude this statement by dispelling rumours some of you may have heard regarding maintenance work on Air Canada aircraft which could be outsourced to Aeroman, an airframe maintenance company located in El Salvador and owned by Aveos.
To begin, let me start by saying that Aeroman is not certified to perform maintenance work on Air Canada aircraft, something your colleagues at Transport Canada can readily confirm. More importantly, Air Canada has absolutely no intention of sending any airframe maintenance work to Aeroman, now or in the future.
I would like to complete this by assuring you that Air Canada complies with and will remain compliant with the Air Canada Public Participation Act.
[English]
My colleagues and I would be pleased to answer your questions in the official language of your choice.
[Translation]
Thank you.
Welcome to the committee, witnesses.
I'm very disappointed. Ms. Sénécal, I deal with the employees of Air Canada every day, and I hold them in the highest regard. Now, today, when I am listening to you, I'm very disappointed, because you have come to the committee to speak on the Air Canada Public Participation Act, but I'm hearing that either you are not in a position to answer those questions, or you are not capable of answering those questions, or you do not want to disclose those answers. I, personally, feel that we are disrespected here, and I ask that you and your colleagues come up with those answers. That is why you are here at this committee.
I'm going to ask these questions again, and I hope you are able to answer them.
In your opinion, what does the obligation to “maintain operational and overhaul centres” in your articles of continuance mean for Air Canada?
A voice: Legal action.
Mr. Joseph Galimberti: I can't speak to any potential future lawsuit. As far as we're concerned, we are compliant with the legal obligations the Government of Canada placed upon Air Canada, the corporation.
On a going-forward basis, we have, as a corporation, no ability to enforce law. We do not enforce the law upon ourselves. If we are found to be in contravention of that act, then there are certain remedies that are obviously in place. But as to our opinion, it's not relevant. We don't enforce the law. We didn't create it. We live under it, we respect it, and we have committed to respecting it going forward.
I would like to point out to Mr. Jean that the act was introduced in 1985, but it received royal assent on August 18, 1988, under the Conservative government at the time. Don Mazankowski was the Minister of Transport.
I would like to come back to you, Ms. Sénécal. You thought that I had perhaps forgotten you.
I would like to say to Mr. Galimberti that I appreciate the answer he gave to my colleague Mr. Dhaliwal, when he said that the law was clear. Everyone who knows how to read, even a child who is learning to do so, would understand that what you have there are provisions requiring the corporation to maintain operational and overhaul centres in the three cities. You are right, the law is clear.
You are correct, Ms. Sénécal, in saying that Air Canada must comply with the law. You told me earlier that Air Canada had 1,500 employees in the overhaul centres. I will repeat my question. I will give you another chance, because the first time you went off in the wrong direction.
How many employees does Air Canada have in the overhaul centres located in Winnipeg, Mississauga and Montreal?
:
This is my interpretation: I believe that you are doing indirectly what the law prohibits you from doing directly. You are a lawyer; so am I. That is a basic principle of law, you cannot do things indirectly. That is why Mr. McCallum was asking you questions about the installations that Aveos acquired in El Salvador. You are required to maintain overhaul centres in those three cities.
I quoted the letter of the law. As a lawyer, you know that there is also the spirit of the law. I did a little research at the Library of Parliament to read up on the discussions that were held in 1988 on Bill C-129, which dealt with this piece of legislation. Mr. Jeanniot, your former president, gave a very good description of what are maintenance and overhaul centres.
I will not have enough time to ask my last question, since my speaking time is almost up. Please consult page 118 of the debates of June 21, 1988. Please note that, Mr. Galimberti: I am referring to page 118 of the debates of the legislative committee, dated June 21, 1988, when Mr. Jeanniot gave a very good description of what are maintenance and overhaul centres. I am starting to become familiar with the issue.
Janet Smith, Deputy Minister of the Office of Privatization and Regulatory Affairs of Canada, also appeared on that occasion. Mr. Minaker, a conservation MP, said the following:
I have a question for those who are here to advise us. It is my understanding that section 7 will prohibit any future board of directors of the new corporation from manipulating the mandatory provisions set out in paragraphs 6.(1)(a), (b), (c) and (d), especially with regard to the overhaul centres located in Winnipeg, Toronto and Montreal.
Would that section prohibit them from doing anything in the future? This is 2010, we are in the future.
Here's what Ms. Smith answered:
That is correct. Moreover, paragraph 6.(1)(a) prohibits them from, let us say, incorporating in a province in order to circumvent the regulation.
To circumvent a regulation means to do indirectly what cannot be done directly.
Ms. Smith concluded her response as follows:
There can be no transfer of jurisdiction.
Then, Mr. Minaker added this:
If I am not mistaken, neither can they do that through a two-thirds majority vote...
Ms. Smith then specified the following:
The only way for them to do so is for someone to amend the act.
That is why I first asked you whether the act was still in effect and whether it had been amended. The answer is no. I will continue to speak out about this, and I hope that the other parties will support me: Air Canada is doing indirectly what it cannot do directly.
In your presentation, you said that Aeroman did not have the required certification. What would prevent it from being certified? You concluded by saying that Air Canada had absolutely no intention of sending any airframe maintenance work to Aeroman, now or in the future.
What guaranties do you have to that effect? Are we to take your word for it?
I have to say, my curiosity has been rising as this committee meeting has gone on.
My understanding, from what the witnesses have said, is they're not now breaking the continuation articles, nor do they have any plan to. So I have to say I'm a little bit curious. If they're not breaking any law or anything and they're not planning to, why are we doing this? Nevertheless, my understanding, from what's been said, is that under the act that they're to continue under, the maintenance places have to be in Mississauga, Montreal, and Winnipeg. They cannot move anywhere else in Canada. Is that correct?
I want to thank Monsieur Guimond for providing us with a backdrop to this discussion. There is a historical perspective, a lens that needs to be provided to this. Also, the spirit or the intent of Parliament obviously has to be examined.
To Mr. Jean, I welcome your references to the current financial performance of Air Canada and its contribution to Canadian society. Perhaps if we as a committee also went back and asked our analysts, Mr. Chair, through you, to provide the historical perspective of why it is that the Air Canada Public Participation Act was actually drafted and passed by Parliament, perhaps we'd get a view, then, if included in that analysis would be the amount of public money that was put into Air Canada to actually create the position so that it could be in the commercial environment that it is today.
I have to say to the witnesses, though, through you, Mr. Chair, that lambs are becoming lions on this issue as a result of some of the testimony we're hearing this morning. I am extremely intrigued that senior representatives, or anyone coming before a parliamentary committee from the company, would not be able to answer basic, raw questions on the Air Canada Public Participation Act related to the ongoing operations of three maintenance centres. It gives parliamentarians somewhat of a cue that something is up.
I am intrigued by the way the company has structured its business. You outsource to a private contractor, yet it's Air Canada that pays the salaries of the contractor's employees. You don't feel as though there's any obligation on the part of Aveos, it's all on Air Canada, yet you cannot tell us whether or not there is anything built into the contract between Air Canada and Aveos to maintain Air Canada's obligations.
If I were a shareholder listening to this testimony, I'd be asking myself a very serious question. If Aveos decides to pull its operations out of those three centres, would Air Canada still be obligated to fulfill its contract with Aveos and the hundreds of millions of dollars that are implied therein? Would it then also have to open up brand new maintenance centres in those three urban centres to be able to maintain its obligations under the act?
:
I just want a very simple clarification, Mr. Chair.
Again, I would like to thank the witnesses for coming here today. But most of the answers I'm hearing are that we're asking hypothetical questions—yet they're very simple and critical to the proceedings of this committee.
You are a lawyer. I'm an engineer, and I just see black and white. But being a lawyer, you certainly would foresee the future, right?
And in terms of all of these hypothetical questions that are being asked, from your perspective, you analyze the contract that you have, even though there is confidentiality and whatnot. But will the agreement between you and the other company still maintain, follow, and be in compliance with the act?
:
I think the question we're wrestling with here is the nature of the relationship between you, Air Canada, and Aveos.
It would appear to me, in my paralegal mind, not my lawyer-like mind, that you've assigned an agent to fulfill your obligations under the act, and this is where it gets murky. You have an agent now who's doing the maintenance, not Air Canada. The Air Canada Public Participation Act only applies to Air Canada; therefore, Aveos cannot be held liable or held to any standard within that responsibility. Aveos does not have any responsibility.
I'm trying to bridge the gap as to whether or not you structured a relationship with your agent in terms of fulfilling your commitments. It appears to me that you did not.
So I would agree with Mr. Jean that's it's a terribly drafted law, in that it's not inclusive of the intent of Parliament at the time. You're leaving me with the sense that we need to amend the law and actually hammer down how you deal with your agents, so that this confusion or ambiguity can't be allowed to continue.
Do you have anything you could offer us as to how you structure your relationship with your agents so that we can feel confident, above and beyond your simple statements about being in compliance, that there are mechanisms to make sure you're in compliance?
If I am taking this attitude when asking my questions, it is because there are some unknowns. The Air Canada officials have stated that—although I am persuaded otherwise—they no longer have any overhaul centres, that they sold them to Aveos. And yet, there is no guarantee that Aveos will meet the principle of public participation; we will not let ourselves be fooled, since the act targets Air Canada. Aveos is a private company, a third party that is not required to comply with the Air Canada Public Participation Act. Our concern is that the maintenance work will be offshored to other countries.
I am referring to El Salvador. There are also rumours circulating about Costa Rica. I am not being racist toward those countries that also carry out maintenance. However, we are assured that the people working at the three overhaul centres in Canada are specialists, professionals. We expect that Transport Canada officials enforce the regulations. In the aviation sector, there is much that is subjective, and much that is built on trust. If I had the opportunity to go to Peru and had to choose between Air Canada and Aeromexico, I would choose Air Canada because of its good reputation.
But small accidents might have an impact on a company's reputation. Take the example of the crash of a Regional Jet that missed the runway and then ploughed to a stop during a storm in Fredericton, a few years ago. The first thing that Air Canada did was to send people with five gallons of paint to paint over the Air Canada logo. You knew that those pictures would be broadcast around the world. You did not want that to tarnish your reputation. You are opening yourselves up to such things and should assume the consequences.
I would like to come back to the testimony given by Mr. Mazankowski, the former Conservative Minister of Transport. During his appearance in 1988, he said the following:
There are other significant points that, in my view, are key elements of the legislation. First of all, the bill states that the head office of Air Canada will remain in Montreal. Furthermore, it guarantees that Winnipeg, Montreal and Mississauga will maintain their operational and overhaul centres. Those provisions reflect decisions made by the corporation [...]
We are also talking about the application of the Official Languages Act. When I sat on the Standing Committee on Transport, some 10 years ago, we dealt with the demise of Canadian Airlines, a company that merged with Air Canada. My party and myself, as the transport critic, were on the side of Air Canada, not Canadian Airlines, a company that was controlled by American Airlines, whose head office was in Dallas. I wanted the jobs to remain in Quebec and Canada.
Conservative minister Don Mazankowski made the commitment regarding the head office, overhaul centres and the Official Languages Act. He limited ownership of Air Canada shares by foreigners to 10%. You, Conservatives, gave us those guarantees. If you again want to reverse the situation, you can, but you will have to live with the consequences in the cities of Montreal, Mississauga and Winnipeg.
Was Minister Mazankowski simply going through the motions? Did he try to mislead us when he said that in 1988?
I thought Monsieur Guimond made good points about the letter versus the spirit of the law, and doing things directly or indirectly. I think a number of people, including Mr. Jean, have commented that the act was badly drafted.
So I'm wondering what you would think of some potential amendment of the act to make more explicit what was previously implicit in it, an amendment to the effect that not just Air Canada but also derivatives of Air Canada, like Aveos, would be required to have their facilities in these three cities. That would put peace in people's minds so there's no uncertainty as to whether these jobs might be transferred out of the country.
What would you think of amending the act to tighten it up so that it reflected the intentions of people like Mr. Mazankowski at the time it was drafted?
:
Thank you, and happy holidays.
For the committee, there are just a couple of things.
In the response from Nav Canada and the department, there was a question in regard to noise, which was referred to Health Canada. I'm just advising the committee that I am going to forward that to Health Canada to get the answers to some of the questions.
Also, a budget has been circulated and I need a mover.
It is moved by Mr. Mayes and seconded by Mr. Dhaliwal.
(Motion agreed to [See Minutes of Proceedings])