TRAN Committee Meeting

STANDING COMMITTEE ON TRANSPORT

LE COMITÉ PERMANENT DES TRANSPORTS

EVIDENCE

[Recorded by Electronic Apparatus]

Wednesday, February 16, 2000

• 1530

[English]

The Chair (Mr. Stan Keyes (Hamilton West, Lib.)): Good afternoon, colleagues. The clerk is just now distributing copies of the remarks that will be made to us this afternoon by the Minister of Transport, the Honourable David Collenette.

We want to thank you, Minister, for taking the time in your schedule to come before this committee and answer what may well be a plethora of questions coming your way on different matters.

We also welcome to the table the minister's deputy minister, Ms. Margaret Bloodworth, and assistant deputy ministers Louis Ranger, Ronald Sully, Ron Jackson, and Janet Milne.

Thank you, everyone, for coming to the Standing Committee on Transport.

I think, colleagues, you now have copies of the speech.

Minister, as common practice, you have 15 to 20 minutes to deliver a message to us, and then we'll begin questioning from colleagues from the House. You're welcome to begin your remarks whenever you're comfortable.

The Honourable David M. Collenette (Minister of Transport): Thank you very much, Mr. Chairman.

Although I won't be announcing the airline bill this afternoon, there is something else to do with the airlines that is of interest that I'm announcing, and I'll get the press release for you in a few minutes. This will be one of many announcements dealing with air issues in the next little while.

I really appreciate the opportunity to talk to you, because 1999 was a very busy year, and this year is going to be equally busy, if not busier. It seems that many of the interesting files facing government are now at the Department of Transport, and with your cooperation I hope to be able to deal with these pressures as they come along.

Today I'd like to outline the major initiatives that will be before us this year and update you on our legislative program to give you a sense of what's ahead in the months to come.

First of all, on the issue of airline restructuring, much has happened on this front since I last appeared before you in October. I'd like to begin by thanking all of you for the report and recommendations you provided on December 8. My officials and I have reviewed your work very carefully.

As you are aware, last summer we were faced with a situation that was cause for very serious concern, and your efforts, colleagues, contributed greatly to the resolution of the issue.

As you know, on December 21 I didn't really have much chance to talk to most of you about this, because most of you had left for the Christmas break. But we were able to announce that we had accepted the transaction involving Air Canada and Canadian Airlines and that we had allowed it to proceed.

The approval was contingent, as you know, upon commitments made to me and undertakings to the commissioner of competition by Air Canada. As a result of the negotiations, Air Canada agreed to two important commitments that addressed key concerns identified by me that were included in the policy framework.

First was a commitment regarding service to small communities. For the next three years, Air Canada has committed to maintaining service to all communities currently served by it and its regional affiliates, as well as Canadian Airlines and Canadian Regional Airlines. In the case of Canadian Regional Airlines, if it's sold, as has been requested by the commissioner of competition, the obligation to serve these points will pass to the new owner.

Second was a commitment with respect to employees. Air Canada has committed to no involuntary layoffs or relocations of employees of Air Canada, Canadian Airlines, or their affiliates until March 2002. Best efforts will be made with all bargaining agents and binding and enforceable collective agreements to reflect this guarantee to employees.

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These commitments address key recommendations that you had made and ones I was very strongly in favour of.

The next step is tabling of the legislation that will enable certain elements of the policy framework to be implemented. We're just putting the final touches to this, and I'll be introducing the bill in the next few days, hopefully by week's end, and making a more detailed statement at that time. I would therefore propose not to elaborate in any substantive way, since I will be back to you with the bill at a later date.

There was an announcement I've just been able to make with respect to additional services by Canada's chartered carriers, giving them new international routes, as well as Icelandair, which will be of particular interest to Mr. Casey. That press release is on its way over. That will be circulated to you, so I would certainly be prepared to answer questions on that. This deals with Air Canada's services to Mexico, and Canada 3000 and Air Transat services to Europe.

I want to emphasize, with all of the discussion on airlines, that safety must remain a paramount objective. It's not going to be compromised under any circumstances. The department has policies and procedures in place to ensure these standards are maintained, and we've already established an integration team to monitor both the newly merged regional and national airlines as well as the new entrants on the national stage.

An issue that's going to come more and more to the fore in the next few weeks is the whole issue of grain-handling and the transportation system. We're moving ahead with this initiative. It is a difficult issue to deal with. I might remind you that we began this process some two years ago. We committed ourselves to a full and comprehensive consultation, and we delivered on that promise. In fact I think it's safe to say that our work has exposed some of the truly complex relationships and critical legislative elements that affect this very important segment of our economy.

You're all familiar with Justice Estey's report and Mr. Kroeger's subsequent consultations. Whatever the criticisms that will come in the future, I don't think anyone can criticize the department or me for not at least having done all we could to listen to stakeholders.

I know that to some it seems the process has taken a long time, and I do understand the frustrations of people like Mr. Bailey and others from the prairies, but rushing ahead without due consideration of each element would, I believe, not be in everyone's best interest.

So we're well on track and we're in the process of reaching a final decision on a reform package, and this is one I hope I can deliver on. Certainly your assistance in this regard will be appreciated as we move forward.

[Translation]

Revitalizing Canada's passenger rail system is another ongoing initiative. The system has played an important role in Canada's transportation system in the past, and I remain convinced it can play an important role in the future.

As you surely know, I'm strongly committed to VIA Rail's revitalization. In October 1998, through our response to your report, the Government of Canada signalled its long-term commitment to this project—and today, this remains our core commitment to Canadians on this matter.

We've spent the past year exploring options to fulfil this commitment, and I expect to make a detailed announcement soon.

[English]

Another issue that has come to the fore since Christmas is the proposed combination of Canadian National and Burlington Northern Sante Fe. There's been an intense amount of press on this particular issue. Some people call it a merger. They call it a combination or a consolidation. There's no question it's too early to determine what it really is going to be, and certainly there's no question that if this particular deal goes through it will have a major impact on North America's transportation infrastructure.

As you know, the United States Surface Transportation Board is launching an in-depth, 18-month review of the possible ramifications of the combination. And in this country, Transport Canada is studying the issue closely to ensure that the proposal complies with all regulatory and statutory requirements. In addition, the Competition Bureau is examining it to determine the possible effects on competitiveness in the industry, while Industry Canada and Investment Canada are conducting assessments of their own. It's an issue that will have to be measured carefully against all interests, and it's certainly something I'm sure this committee will have some interest in as the months go by.

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Turning to highway infrastructure, obviously this is something we've talked about over the past two years. As you know, there's been a general agreement by provincial and territorial colleagues that further investment in the national highway system is required, particularly with the increasing levels of trade we're experiencing.

There are valuable transportation corridors—or rivers of trade, as some call them—that really do need investment. Windsor is perhaps the one that really comes to mind because of the problems of hauling goods on what is in effect a city road to the Ambassador Bridge. But the kinds of problems that Windsor has are mirrored in New Brunswick, Quebec, other points in Ontario, Manitoba, Alberta, B.C., and Saskatchewan, to some degree—indeed all of the provinces where there are major crossings.

Now, identifying problems is the easy part. Arriving at solutions is far more complex. There are multiple jurisdictions involved, and other national priorities such as health, education, and social services. So really, a strong case has to be made to increase highway funding.

[Translation]

Over the past two years, I've been working with my provincial and territorial colleagues to build a national consensus for placing transportation at the top of the public policy agenda.

It's a real challenge. But I'm confident that with co-operation and strategic investments, we can develop the responsive and productive highway system we need to keep Canada's trade “on the move” in the years to come.

We're also proceeding with the establishment of a Transportation Appeal Tribunal of Canada which is an extension of Canada's Civil Aviation Tribunal to include marine, air and rail. The expansion of this quasi-judicial body will be a significant regulatory reform, as it will streamline the appeals process for complaints for all areas of the transportation field.

After further consulting all stakeholders on how best to proceed, I hope to table the necessary legislation later this spring.

[English]

On the policy and legislative front, Transport Canada is at a very interesting juncture. While our initiatives are still firmly rooted in the government's commitment to sound fiscal management and lower public debt, we're now looking at ways to build on this foundation and make refinements where necessary.

Take the national airports policy, for example. As the divestiture process nears completion, we're taking steps to measure and assess our success to date and find areas where we can strengthen Canada's airport system. The policy has dramatically changed the way our airports are operated, as you know.

Since 1994 we've seen 105 airports transferred to not-for-profit corporations that are better able to market and run airport services than the government. I should say, for the benefit of Mr. Casey, we've at last transferred Halifax. It had a long gestation period, but the airport has been reborn. I hope everybody in Halifax and Nova Scotia will get on with the business of running an airport and not ruminating over the negotiating process of the last two years.

Tough deals are tough to come by and require a lot of give and take. I think we were very flexible, but we remained within the ambit of the national airports policy. We can say to everyone else in the country that Halifax got a good deal, but a fair deal, and one that was consistent with the policy. But it's not simply a question of the government commercializing facilities such as the airports. We have to be involved in their continuing evolution, and we're taking steps to ensure their success in the years to come.

As you know, we've been reviewing the leases of the airports that were earlier transferred to the local authorities at Vancouver, Calgary, Edmonton, and Montreal. This will certainly have ramifications for the rest of the airports, including the larger ones like Toronto that have been transferred.

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A number of consultants have examined the financial viability of these airports as well as their management, governance structure, and present and future capacities. As noted in the lease review consultation report, the results are quite good for these airports in particular and for the airports policy in general. But the report also noted that some refinement is needed, such as the need for more transparency on the part of airport authorities, particularly regarding their pricing practices. The department is addressing these concerns, and I'll be bringing a range of possible remedies to cabinet colleagues later this spring.

[Translation]

The Canada Marine Act, too, has been a great success. This Act establishes a new way of doing business for Canada's ports. By creating a new governance structure for our major ports, we've provided them with more commercial discipline and management autonomy, so that they can better respond to their users' needs.

We're doing the same for our smaller regional and local ports, as you know, transferring them to provincial governments, municipal authorities, or other private interests, and giving users more say in upgrading port facilities, matching services to demand, and attracting new businesses.

We've made significant progress on this front, with 357 public ports transferred, and more ready to go this year.

[English]

There's still a lot of work to be done. For example, the ports of Belledune and Oshawa have applied to become CPAs, and we're in the process of assessing their applications. Just so that it doesn't end up in a column in the newspaper, I have to admit the official dissolution of Canada Ports Corporation has been put off again; it's being kept open with minimal staff to permit Belledune to be resolved and to ensure the Port of Prescott is transferred to local interests. So we're not dragging our feet; we just have the statutory requirement to keep Ports Canada going at a very minimum to allow these two projects to go ahead.

The act also, as you know, Mr. Chairman, allowed us to commercialize the St. Lawrence Seaway. The transfer to the new management corporation has gone exceptionally well. I would be remiss if I didn't say once again a personal note of thanks to you for having shepherded this particular piece of legislation, from early inception at the policy stage through the committee, and also while you were parliamentary secretary.

Also—this is going to be a busy spring, so I hope you're not planning to go anywhere—we're planning to amend the Canada Shipping Act. As you know, part one was put forward last year, and part two is coming along. This is a high departmental priority. We've been consulting with the marine industry and other levels of government on the issue for four years to ensure the proposed amendments are compatible with advances in technology and with domestic and international rules and standards. It's truly an extensive overhaul, and we've taken the time to get it right. So next month, that bill will be introduced into the House, and I hope the end result will be a clear and modern act that will streamline procedures and eliminate bureaucratic obstacles in the sector.

In a related initiative, the proposed Marine Liabilities Act will consolidate all existing marine liability laws into a single streamlined act that will establish uniform, and in some cases new, liability rules for marine carriers regarding passengers, goods, and pollution. I expect to introduce this bill in the next month or so.

[Translation]

The Shipping Conferences Exemption Act is also being reviewed by my department. Developments in the U.S. and elsewhere have prompted this review, in order to keep the Act current and in-synch with Canada's trading partners. In consultation with stakeholders, my department is preparing amendments to the Act that will encourage competition within the industry, and allow Canada's ports to continue competing effectively in the North American context. I expect to introduce the amending legislation later this spring.

[English]

We're also working on the MVTA, as you know, in the form of Bill C-77, which I introduced last spring, to establish carrier safety as the focus for motor carrier regulation. More specifically, the revisions use new national safety code standards as the basis for creating a national safety rating regime measured by actual on-road performance.

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I intend to re-table the safety provisions of the bill in the near future. The bus provisions, which had some degree of interest on the part of certain members in the House, will, because of the lack of consensus, not be dealt with in a statutory way. I want to refer that particular question to this committee for further examination. While I remain committed to addressing the bus regulation provisions, I don't think we can afford to hold back on the safety amendments of the act while further debate takes place on the bus issue. I would hope that those people who had problems with the bus provisions but were generally in agreement with the safety provisions will expeditiously deal with this particular bill, now that we've made the changes and we've listened to parliamentarians.

As if that isn't enough—we're talking about six or eight bills in the next few months before June—we're involved in many other issues. We continue to be involved on the safety front every day in all modes, and we are developing and enhancing our transportation safety regime through various activities and programs. So it's business as usual for Mr. Jackson and his officials on that score.

The recent release of our strategic plan for transportation safety and security reinforced the government's commitment to helping develop a safety-conscious culture in Canada's transportation community. A good example is the development of regulations for effective safety management in railway companies, a key component of the amended Railway Safety Act, which this committee worked on a year ago.

[Translation]

Promoting environmental sustainability in transportation is another ongoing priority, as we help develop balanced and economically sound programs and strategies that will ensure a high quality of life for Canadians. Climate change is perhaps the single most important challenge facing transportation in this area—in fact, transportation activities account for about a quarter of Canada's total greenhouse gas emissions.

As part of the climate change strategy process, we're participating in the Transportation Table, a multi-stakeholder organization, which is examining opportunities to mitigate greenhouse gas emissions in all transportation modes. So far, over 100 options have been explored, and the Table submitted its Options Paper Report in November.

This month the Table is conducting stakeholder consultations on the report in eight cities across Canada. The results will be submitted to all Ministers of Transportation and the National Climate Change Secretariat, and the document will feed into a larger national implementation strategy on climate change involving all sectors of the economy. I should point out that this strategy is being developed through a comprehensive consultative process that will take into account the actions of our major trading partners.

[English]

We're examining the benefits of using new technology to help us get the most from our transportation system. Intelligent transportation systems in particular can go a long way in better coordinating the infrastructure, communications, and processes at work in our daily transportation activities.

So as you can see, the department is busy on many fronts, guiding and maintaining Canada's transportation system, which plays such a role in our economic prosperity and quality of life. It's our intention to help ensure the system has the tools and solid legislative and regulatory foundation it needs to continue to serve Canadians well into the years to come.

I've given you a brief snapshot of some of the big initiatives the department is involved in, as well as some of the legislative progress we've made in recent months. There are many issues on the table. The department is working hard to guide each of them through their early proposal stages to their actual implementation.

The department is committed to greater efficiencies and instilling more business discipline across all modes. We've made some great strides in recent months, and we'll continue to work on this.

Obviously I'll be back when the estimates come forward in a couple of months, and you'll have more opportunity to question us on all aspects of transportation policy, but today marks a good start for the year. I welcome your questions.

[Translation]

Thank you.

[English]

The Chair: Thank you very much, Minister.

Colleagues, we have to be in the House for a vote at about 4:15, so we have time maybe for one five-minute round of questions from Val Meredith. Then we'll break and come back right after the vote to continue.

Minister, you're still going to be available?

Mr. David Collenette: I'm yours.

The Chair: Terrific.

Val, do you want to start?

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Ms. Val Meredith (South Surrey—White Rock—Langley, Ref.): Thank you, Mr. Chair.

I'd like to thank you, Mr. Minister, for appearing before the transport committee.

I'm going to be quite abrupt here. I appreciate you identifying some of the issues the department is moving forward on. There are some issues we need to be concerned about, whether it's air, with the Air Canada and Canadian merger; the emergency response issues we have in our rural communities, which have taken on the airport authorities; rail, with the Estey and Kroeger reports; hopper cars; the VIA Rail need for money; the combination; marine; the Vancouver port, where for 10% of their time last year they were shut down because of problems with the transportation system; continuing difficulties with the Atlantic ferries; the national highways program; the federal government collecting $4.5 billion in fuel taxes, and yet last year it spent only $115 million on highways; our highways, where the traffic is getting congested; the gridlock in major cities; and the trucking industry, which is approaching chaos. Also, we have the highest fuel costs we've ever had in history.

The government has been around for six years, and in all of this there doesn't seem to be the development of an integrated, multi-modal strategy to improve on and to deal with all of these issues. The government seems to deal with each issue in isolation to the whole. I am wondering if your government is putting any effort into getting an integrated national transportation strategy in place before we start isolating the expenditure of moneys, i.e., putting subsidy money into VIA Rail when we don't even know what role VIA Rail will have in the entire transportation system in the next 20 years. Is the department moving forward to develop this integrated, multi-modal, national transportation strategy?

Mr. David Collenette: I hate to differ with Ms. Meredith on this, but I thought that for the last two years we have demonstrated that there has been a comprehensive plan that we have followed. There are various components of it, and they're interlinked. We've talked about air, and I've talked about intermodal links of getting to airports. We've talked about the national highway system, which also links airports, border crossings, and provinces. I've talked about the need to try to get money into urban transportation, because some of the big cities in the country, such as the greater Vancouver area, where you're from; Toronto, where I'm from; Montreal; Calgary; and some other big cities have needs because of congestion, growing pollution, and quality-of-life concerns. I've made these a priority. I've made public speeches on this. I'm hopeful that we can address these matters in the next few months.

We announced in the throne speech a commitment to an infrastructure program with a transportation component. I'm hopeful that my colleague the Minister of Finance will shed some light on the financing of this particular program and its parameters. Certainly, I know the advice I've given him on its application to the transport area.

The whole issue of dealing with grain transportation is certainly tied in with the efficiency of the ports. We've reformed the port system. In fact, in the whole Estey and Kroeger process we examined ports. We examined the hopper cars.

So I beg to differ. I think we are integrating things, and I think there will be more integration in the long term. Mr. Sully can talk about this. When we talk about Kyoto commitments and the work of the transportation tables, there is work going on all the time with the provinces to develop a comprehensive, integrated transportation plan.

The Chair: Thanks, Val. Time goes by when you're having fun.

Ms. Val Meredith: Is there no more time left?

The Chair: We've had the five minutes.

Colleagues, we'll now break for the vote at 4:15, and then—

An hon. member: We can ask one more.

The Chair: Do we have time?

An hon. member: Sure.

• 1600

The Chair: All right.

John, welcome to the committee.

Mr. John Solomon (Regina—Lumsden—Lake Centre, NDP): Thanks very much.

The Chair: Mr. Calder.

Mr. Murray Calder (Dufferin—Peel—Wellington—Grey, Lib.): Thank you very much, Mr. Chairman.

Minister, it's very interesting to read this press release, but I have a question here. As Canadian is slowly sort of bowing out, we raised this issue before about the partnership between Star Alliance and Oneworld. I was talking to representatives of British Airways. Right now they cannot really perform a seamless ticket from say Lethbridge to London. That is something that is probably going to squeeze them out of business. We're into this monopoly situation where we're worried about Air Canada, only this is going to be on an international basis. Both of the two air carriers you've announced here are chartered airlines. But for a businessman who, for instance, is trying to make that trip, is that going to be a problem for them, or is British Airways concerned about something they shouldn't be concerned about?

Mr. David Collenette: First of all, Mr. Calder, what we are announcing today with Air Transat and Canada 3000 is that we're designating them as scheduled carriers to the United Kingdom and Germany. I'm not sure that British Airways will be happy about that, but that's life in the modern world.

Mr. Murray Calder: Okay.

Mr. David Collenette: There's no question that because of the consolidation that is going on, Star Alliance for now will have an advantage or down the road. But that begs the question as to whether or not other carriers as they start up or a potential buyer for Canadian Regional Airlines, which has been ordered by the Competition Bureau to be divested if there is a buyer, could not ally themselves with Oneworld. It's not just British Airways, but it's Cathay Pacific, which flies on the Pacific Rim, as well as American Airlines, and they all have a vested interest in replacing the Canadian Airline's feed.

I'm not sure, so I'll ask Mr. Ranger: How long is the feed for? What's the deal between the airlines? Do you remember? Is it two years?

Mr. Louis Ranger (Assistant Deputy Minister, Policy, Transport Canada): There's an agreement with American Airlines for ten years.

Mr. David Collenette: It's just with American.

Mr. Louis Ranger: Yes.

Mr. David Collenette: When does the British one expire?

The Chair: It expires in July.

Mr. David Collenette: Obviously they have to try to forge alliances with other carriers in Canada if they want that feed, and I assume that they would look at the options. They fly, I believe, into Montreal, Toronto, Calgary, and Vancouver.

Not all small airlines in the country will be part of Air Canada's network. There are smaller, independent airlines. There is Canadian Regional that's for sale. There is WestJet and Royal. There's Skyservice, which is not a competitor on the U.K. route, and it does offer limited services within Canada on a charter basis, and maybe they'll go to more scheduled services.

The key here, though, is that it's going to take a number of months for this entire reorganization to shake out. I know they're concerned about it, and I'm sure that they have the ingenuity and the contacts to try to address the problem.

Mr. Murray Calder: Mr. Chair, I'm going to switch from planes to trains now.

We've heard a lot of talk about the possible merger between Canadian National and Burlington Northern. While I was flying here to Ottawa, I read an article where Paul Tellier was saying he's going to be president and stay in the railway business for a long time. Do you have any concerns about where head office is going to eventually end up after he retires and is no longer president? What about the competition between CN and a huge railway and CP? What about that? As a government we may end up again taking over a railway because you might have a railway that is in financial difficulty just because of that.

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Mr. David Collenette: Well, as I said in my speech, I think it's too early to assess the implications for Canadian transport policy. This is not a deal that's going to be done overnight. To get all the U.S. approvals is going to take 18 months. We do have our officials working on it. Industry Canada is working on it, as I've said.

The Canadian National Act is quite clear, and that is that the head office must be in Montreal. What I understand has been said by Mr. Tellier under this proposal is that the new headquarters for North America Rail will continue to be in Montreal. Again, these are points we have to look at.

I can't offer you any more detailed response. I suggest that at a certain point you might want to get Mr. Tellier to come to the committee and ask him to give a presentation. Certainly by the time I come back on the estimates, I'll have more to say on this proposed consolidation.

The Chair: Thanks, Mr. Calder.

Colleagues, we're recessed until after the vote.

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• 1638

The Chair: Excuse the interruption for the vote.

Mr. Guimond, please.

[Translation]

Mr. Michel Guimond (Beauport—Montmorency—Côte-de- Beaupré—Île-d'Orléans, BQ): There are many points in your brief, Minister. I know that you cannot speak in much greater detail, but we do have to read between the lines somewhat. My first question is about the lease review at the Calgary, Vancouver, Edmonton and Montreal airports. My question is specifically about the Montreal airports.

You know that when the Montreal airports were transferred to the community in 1992, Minister, there was no provision for leases. However, the Montreal airports agreed to reinvest all operating surpluses, and this was very necessary to ensure the viability of the terminal and the development of the airport.

Can you confirm today whether you intend to review the situation, if possible? If so, does that mean that you are going to ensure that the general viability of the Montreal airport will be considered before proceeding? That is my first question on airports.

I come now to my second question. When you mentioned that we must look at the need for greater transparency, does that mean that there should be directors appointed by the federal government, which is not the case at the moment in Montreal? If you decide to do that, how will the federal government go about designating or appointing these directors?

Mr. David Collenette: Thank you, Mr. Guimond.

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It is true that we are reviewing all our arrangements with airports, particularly those that were commercialized by the former Conservative government. We are looking at all aspects of transparency, governance and accountability. In my opinion, the objective is to have one system that applies to all airports. At the moment, we have local airport authorities and Canadian airport authorities. I think it would be preferable, in the public interest, to have a single system for the whole country.

As you know, there are federal, provincial and municipal representatives at the Toronto and Halifax airports. At the moment, we are discussing the transfer of the Quebec City airport and a few weeks ago, we announced an agreement in principle regarding financial arrangements. I think it would be strange to have both the provincial and the federal governments represented at the Quebec City airport, without similar representation at the Montreal airport. I don't think that would be good.

So it is too early to tell what recommendations will be made to Cabinet, but I'm very concerned about the situation at the Montreal airports, where there is no federal government representative.

I must emphasize the fact that the Vancouver airport voluntarily set aside two positions on its board of directors for people appointed by the federal government. I raised this matter with the president of Montreal Airports, and he is prepared to study this request. I think it is preferable to get a voluntary offer of positions for federal and provincial representatives rather than requiring that through legislation.

Mr. Michel Guimond: I would now like to talk about the bill on the reorganization of air transportation, which is supposed to be tabled by the end of the week. I have here a confidential report from Air Canada entitled Air Canada Regional Proposal to Consolidate, dated January 7, in which Air Canada says it is planning to centralize the administration of its regional operations in Toronto, with regional offices in Vancouver, Calgary and Halifax.

So there would be absolutely nothing in Quebec, which confirms the death of Air Alliance as well as the fact that Air Nova doesn't want to install a regional office in Montreal or Quebec City as was the case before. Have you been informed of this?

I know that it's up to the corporation to make the decision, but in your discussions were you aware of the Air Canada document dated January 7? Were you aware of what Air Canada wants to do with its regional services? I can tell you that the service is abominable right now.

Apparently Air Nova has a fidelity rate of 24% for January and there are a lot of incidents. It's not really encouraging.

[English]

The Chair: Thanks, Mr. Guimond.

Minister.

[Translation]

Mr. David Collenette: As for the headquarters for regional operations, the decision is now up to Air Canada and it is a private corporation. But, as you know, Air Canada's general headquarters must be located in Montreal and that will naturally continue to be the case.

I noted that Mr. Milton announced an expansion of the Montreal operations and maintenance centre at Dorval airport. He stated that for the first time Dorval airport was a hub for Air Canada just as Toronto and Vancouver, and that's good for Montreal.

It's not up to me to defend Air Canada's management decisions, but as you know, the headquarters for the whole corporation is Montreal. That's better than in Alberta, for example, where they lost the headquarters for Canadian Airlines and where there's only a regional office left for all their regional operations.

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[English]

The Chair: Mr. Hubbard, please.

Mr. Charles Hubbard (Miramichi, Lib.): Thanks, Mr. Chairman.

First of all, Mr. Minister, I'd like to commend you for the very ambitious program you have outlined here.

I'm particularly interested in VIA Rail these days, because I've been travelling with VIA and have always enjoyed it. The high-speed rail is one thing, but certainly, Mr. Minister, if we had higher-speed rail than we have now it would be a great asset. I wonder, with our country spending so much time with airlines, if we couldn't think of connecting more of our major cities, especially Montreal-Toronto, by rail rather than by air.

It's rather amazing, Mr. Chairman, that we talk about air rage, and it's the only mode of transportation where you have to pay to use a facility. I think you know that a lot of passengers in this country are in a bit of anger from the minute they step into a Vancouver airport or a Montreal airport to pay $600 or $700 for a ticket and find they have to pay $5 or $10 or $15 to get on the plane. We've never done that in any other mode of transportation in this country that I'm aware of except in the air.

With the airways I also want to bring to the attention of your officials that in Atlantic Canada, with the exception of one airport, we are seeing some very serious problems in terms of their administrative costs and their operational costs because they've lost about 40% of their landing fees.

Last night we had representatives from Fredericton, Halifax, Saint John, and St. John's here meeting with us, and all of them are very much concerned with the fact that they'll be losing about half a million dollars each in the administrative fees and the landing fees they had received from the two airlines that serviced the area previously.

Mr. Minister, it appears that all of Atlantic Canada is saying to us now, in terms of the transportation agencies there, that we have to have an open skies policy or a better system of cabotage in order to facilitate better services and more competition to our airports. I would like to hear from you and your officials, what would your attitudes be in terms of how we're going to address the problem in Atlantic Canada? I know it's being worked out. I know we've had Air Canada saying that we have more of this and more of that.

In terms of the flying ability of people getting to Atlantic Canada or from Atlantic Canada today, we've lost about 40% of our seats. A lot of the aircraft that are travelling at the ideal times for business people are full and you're unable to get to your place of destination within a reasonable amount of time. I wonder if you could comment on how you and your department see this problem. Is it going to work out, do you think, or is it a problem that has to be addressed in terms of changes in how we see the airline industry?

Mr. David Collenette: Certainly I'll say more about this general issue when we bring the bill in, but I can expand on some of the points that were made around December 21 and what led us to where we consolidated the airlines.

There was an overcapacity across the country. You talk about the reduction of capacity in Atlantic Canada, but there is a reduction of capacity right across the country, and that means fewer seats. But I would submit that many of those seats or the vast majority of those seats were empty, and that was the problem. You had two airlines knocking each other over the head flying empty seats. So it's true there are fewer flights, there are fewer seats available, but an airline wants business. An airline is not going to deliberately restrict access to a market that they know is a good one.

Right now there's a bit of a shake-out going on, and I would only ask people to bear with Air Canada while they go through this, because it's a Herculean job they have before them. They have to take a basically bankrupt airline and fund it, cut costs, do all the financing, merge operations, merge equipment, rejig their schedule, and this now is for the world's tenth-largest airline. It's going to be tough. And there will be some cases where people will be irritated, I suppose, because the choice that was previously avialable is not there. But overall, I believe the capacity will meet the needs.

• 1650

Now, you have a particular problem in northern New Brunswick, and I'm very sorry about it. That is, because Inter-Canadian was not part of the Canadian Airlines system, was an independent allied with Canadian but not one of their subsidiaries, it went bankrupt. That meant that Charlo and Miramichi were denied service. Those two airports are not covered under the deal with Air Canada, because the deal with Air Canada only covers the subsidiaries of Canadian Airlines.

For people in your region, the options are going to Bathurst, which is not that far away, and maybe a drive to Moncton, which is a bit of a hike; I'm not sure how long it takes. But I do know that in southern Ontario we have nearly 6.5 million people who are dependent on one airport for service, and that's Pearson. It's not unusual for people from Belleville, Gananoque, Brantford, Kitchener, and Niagara Falls to drive two hours or more just to get a flight at Pearson to go to say Halifax or Vancouver.

So I think we have to keep in mind the levels of service and the markets that are served. Also keep in mind that we have to allow this issue to shake out.

On the question of competition, I'll be dealing with that when the bill comes through. But I have said that we are not prepared to allow cabotage at this time. For all those great observers who say the only way you get competition is through cabotage, you're really saying that Canadians aren't up to the mark. You're not giving Canadians a chance to develop their own air networks and prove their worth.

Yes, we have WestJet there, but hopefully there will be others and the competition will ensue. Canadian Regional is offered for sale by requirement of the deal. So hopefully we'll get domestic competition. But if it works out that Air Canada does not have the competition, then we'll have to obviously talk to our friends to the south and talk about initiating reciprocal cabotage. I've said that publicly, so I'm not scooping myself.

Air Canada's carrying a hell of a lot of debt. I don't want, having presided over the merger of a near-bankrupt airline with another heavily indebted airline, to basically put them at risk and have another bankruptcy on our hands, because we'll all feel that. So I think the way it's gone so far is a reasonable way to go. There will be some hiccups across the country, and we're overseeing this and we'll have more to say about that when the bill comes in.

The Chair: Thanks, Mr. Hubbard.

Mr. Casey, please.

Mr. Bill Casey (Cumberland—Colchester, PC): Thank you. I am certainly pleased to be back here with you again. I missed the meetings we had over Christmas.

Mr. David Collenette: The feeling is mutual.

Mr. Bill Casey: I'm sure.

I would never bring up Halifax, but you did bring it up, so I thought that I would.

Mr. David Collenette: I'm proud of Halifax.

Mr. Bill Casey: I'm sure you are. There's still an outstanding issue there that has left a sour taste in their mouths over the negotiations on the divestiture, and that's the responsibility for the existing pollution problem. There's confusion in Halifax because of commitments made by the Department of Transport and then not followed through upon. One is in your letter of I think it was July 22, which said:

This financial offer confirms Transport Canada's intent to assume liabilities for the current pyritic slate mitigation program.

Then it was clarified from Mr. Cloutier, who said:

The Clause...reflects the commitment that Transport Canada agrees to continue to be responsible for Pyritic Slate runoff existing prior to Transfer Date and the management of the acid rock drainage mitigation measures associated with the problem.

Everybody assumed that those commitments would be honoured and kept and then when the agreements were presented it was different. You've now transferred the responsibility for that pollution problem to the Halifax Airport even though this was a signed memorandum of understanding. That is a very sore point with the community in Halifax.

• 1655

I've asked you four times in the House unsuccessfully if you would go through with that. I even asked a very distinguished parliamentary secretary a couple of times and was not successful there either.

Mr. Roy Bailey (Souris—Moose Mountain, Ref.): No!

Mr. Bill Casey: So rather than ask you if you would go ahead and do it, just between you and me, why did the department change their mind?

The Chair: It might be difficult, just between you and him. You'll have to go through the chair in committee on this one.

Mr. Bill Casey: Mr. Chair, why did the department change those very clear commitments and not follow through on them?

Mr. David Collenette: You know, there's a bit of folklore here. I was particularly annoyed about negotiating in public, which was the mark of these particular negotiations. That's not a way to do business. I don't think it does justice to the quality of the people who live in Halifax, and I'm sorry that happened. But a deal has been signed. A deal's been done. There's been a transfer. If the problem was of such significance as you describe, and if the Government of Canada was so much in the wrong, as you imply, then why did the Halifax Airport Authority sign the deal?

This is local politicking. You know, I'm really tired of it. The deal's been done. I hope the airport authority can go ahead and apply their energies—not the nitpicking with the government, with whom they've signed a deal, but to go ahead and manage the airport. It's a great airport. It's the big hub for the Atlantic.

Now, for details, I wrote a letter to both daily newspapers. They published it. At least one of them did this week. You probably read it.

Mr. Bill Casey: I read it.

Mr. David Collenette: So the answer to your question is right there in the newspaper.

Mr. Bill Casey: And I answered it, too.

Mr. David Collenette: All right. Mr. Sully is responsible for this, if he wants to give you a few more details.

Let's just get on with it. Let's not keep kicking this same old issue. Let's get on with making Halifax a great airport. I've done my part. We've just signed off on an extra flight to Icelandair, which is what everybody wanted in Halifax.

Mr. Bill Casey: And I'm sure they appreciate it.

I'd still like to know why the commitment was changed, because it was so clear. It was very clear. It wasn't subject to interpretation, but it changed. I don't know why, and I'd like to know why it was changed.

Mr. Ronald Sully (Assistant Deputy Minister, Programs and Divestiture, Transport Canada): Mr. Chairman, just to add to what the minister said, actually what it came down to was a combination of a technical problem and a scientific problem.

The memos and commitments you referred to were undertaken in good faith on the basis and understanding agreed to by both parties, which was that the department would handle the runoff mitigation that was attributed to conditions at the time of transfer.

After that agreement was reached, when the lawyers from both sides began to draft the legal terms and conditions it became obvious that it was almost impossible to define which was the molecule of water that was attributed to conditions before transfer and which was the molecule of water that was attributed to conditions after transfer. So we ran into an impasse and we called in an independent expert who has a great deal of knowledge in acid rock drainage. They advised us that the only way to handle that problem is to say that only one party should have responsibility for this, and the logical party to take responsibility would be the one that is operating the airport.

We took that concept back to the Halifax Airport Authority and proposed to them, “If you take on that responsibility”—that is, not only the pyritic slate that is disturbed after transfer, but also what we were responsible for before transfer—“we will reduce your rent by $700,000 a year”. And $700,000 a year is not insignificant when you consider that this is a 60-year lease. The Halifax International Airport Authority agreed to those terms. So that was the reason for the change.

The Chair: Thanks, Mr. Sully.

Mr. David Collenette: Mr. Chairman, that means, if my math is correct, a $42 million rebate to Halifax to take care of pyritic slate.

Mr. Bill Casey: But it's going to cost a million and a half a year to look after it.

Mr. David Collenette: No wonder they signed it.

Mr. Bill Casey: It's an $84 million charge.

Mr. David Collenette: No wonder they signed the deal.

Mr. Bill Casey: Well, I appreciate the explanation, but—

The Chair: Mr. Casey, thank you.

Mr. Dromisky, please

• 1700

Mr. Stan Dromisky (Thunder Bay—Atikokan, Lib.): Thank you very much.

Mr. Minister, when I look at your presentation that you made prior to the vote, I can readily say that you have great expectations of this committee. I'd like to get down to a more realistic level.

Considering that we have about 12 or 13 weeks of operation before we dissolve in June, and in light of all the acts you have before us, at least pending, what are your priorities here? What are your real expectations as far as this committee's endeavours in the next 13 operating weeks?

Mr. David Collenette: The first priority has to be the airline bill. I would hope that could be dealt with very quickly, because this committee and the Senate dealt with the issues. In fact the bill is based on a lot of the recommendations of these committees. That's the first priority. We need certainty there.

The second priority would have to be, I suspect, if we move on grain, the grain bill, because we want this in place for the crop year beginning August 1, and that's not going to be an easy bill to get through.

Mr. Stan Dromisky: No, that's right.

Mr. David Collenette: There will be a lot of concerns there.

The rest are all equally important.

On VIA Rail, I haven't gone to cabinet yet on VIA Rail to ask them for any decisions, but I will be doing that shortly. I don't believe that would require any legislative response at this time. There is certainly an issue of putting VIA on a legislative footing, which is something we want to look at, but the priority right now is to get the funding organized so they can re-equip.

The Shipping Act I think is pretty important, and that's not going to be an easy bill to get through.

I really hope we can deal with the safety provisions of the MVTA, because that should not be controversial. That's sort of motherhood, now that we've taken out the bus deregulation issues.

Those are the ones. They're all important, but in that order, I guess.

Mr. Stan Dromisky: Thank you.

The Chair: Thanks, Mr. Dromisky.

Mr. Bailey, please.

Mr. Roy Bailey: Thank you, Mr. Chairman.

Mr. Minister, we worked long and hard from September through to December, and I was very proud to be a part—a small part, albeit. I want to discuss something very personal to me now and relate it to my colleagues.

I think my colleagues realize that I am the only one on the committee who happens to represent a huge grain-growing area. We live and breathe by the grain industry, and the rail lines and grain transportation are of utmost importance, probably more right now because of the financial situation there.

Mr. Minister, I drove Saskatchewan during the winter of 1996-97, branch line after branch line, and I knew what was coming. I could see what was happening before my eyes. I'm not quarrelling with the route the minister took through Judge Estey and again with Kroeger, but what really disappointed me—and it's kind of a personal thing, and I want my colleagues to bear with me—is that while we've put all this time and witness after witness after witness on the airline industry, we now come to a very important bill as it relates to the grain-handling industry.

You have your recommendations from the group you appointed to bring in recommendations, and therein lies a bit of a problem, in that people confront me daily and say “How come you provided that information?” It hasn't been made clear that those recommendations didn't come from this committee.

I would have liked to have had three meetings and three key witnesses in just to familiarize this committee so that when you go to the legislation on the grain-handling you indeed could say that you had some recommendations and this committee was able to discuss it—albeit not to the same degree as the airline industry, but it had been discussed.

Mr. Minister, if we're going directly to a bill on the grain issue and the grain-handling issue, it's going to be very difficult for me as an individual. I can handle it, I know, but I still think we bypassed a very important group in this process. I know you're pressed for time, but surely since 1996 we could have had even two weeks of committee and brought in key areas of witnesses. And even though the results may not have changed, at least we could have said that this bill is a result of the hearings of this committee.

• 1705

I'm not saying you did it deliberately, sir. I'm just saying it's very awkward for me. This is my whole interest right now. This is where it's concentrated. I feel, maybe unjustly, just a little bit out of place by not having this study, even though it is....

The Chair: Mr. Bailey, if the minister would like to answer that question, that's perfectly fine, but it's probably more a question dealing with the priorities of the committee. It's a question we'll address first thing tomorrow morning, when we discuss what issues we'll be dealing with at the steering committee—which is, for your edification, Mr. Minister, the whole committee. Circumstances came to light for us in the airline industry that prevented us, quite frankly, from trying to deal with that issue quickly, as was stated when we embarked on the airline restructuring issue, and VIA Rail before that, as my researcher tells me.

Most certainly we will be dealing with the airline restructuring issue, but, as indicated by the minister, if the bill is in proper order...I have every expectation that the government is going to provide us with a near perfect bill. If that is the case, we'll be able to get through that bill quickly, but if it has its problems, then we're going to take the time we will need—it might be to the chagrin of the minister—to ensure that customers are protected adequately.

Beyond that, if we can get through it quickly, the grain-handling issue.... There is nothing to prevent this committee from moving more quickly. The government is preparing its legislation, which we would hope to have by April in order to have it complete before the growing season, as Mr. Collenette has indicated. But that doesn't prevent us from having, say, Estey and Kroeger in to speak with us and giving us the details behind their reports and us starting the informational meetings that might be needed.

Minister, if you wanted to go beyond that, you're welcome.

Mr. David Collenette: Sometimes the committee is the obvious instrument, as it was last fall on the airline issue. It was with the ports because C-9 had its genesis with this committee. The chairman was there at the time, or perhaps he was parliamentary secretary, but it was the committee that brought forward those proposals.

On the question of grain, there was a consensus among stakeholders, including the provinces, the provincial governments who came and met with me in July 1997, that we needed an independent, eminent person to conduct this particular matter. We found Justice Estey and he put forward his report. Mr. Kroeger has worked it into an implementation phase.

I know that members have written to me. You've written lots of letters to me, Mr. Bailey, and other members. That has all been taken into consideration. On the assumption that I bring a bill forward, which is my hope, then obviously you're going to have your ability to affect that legislation and make your views known.

The Chair: Thanks, Mr. Bailey.

Mr. Guimond, please.

[Translation]

Mr. Michel Guimond: Minister, I'd like to talk about a matter directly related to your responsibilities, and that's the designation of international routes. Last week, I got a release from Air Canada dated February 9 stipulating, more or less, that Toronto would have its international capacity increased by 22% with Toronto-Hong Kong, Toronto-Honolulu-Sydney, Toronto-Mexico, Toronto-Milan, Toronto-Munich, Toronto-Sao Paulo, Toronto-Tokyo and that this would be happening as early as the summer schedule.

The release you distributed before states:

Minister Collenette also announced the designation of Air Canada to provide air services to Mexico City using their own aircraft on the Toronto-Mexico City and Vancouver-Mexico City routes.

What's happening with the Montreal Urban Community demand, because since 1980 they've been asking for Montreal-Mexico City flights? The Montreal Airports are also asking for those flights. How about the request made by the Montreal Urban Community which, for many years, since Alitalia left, has been asking to get the Montreal-Rome and Montreal-Milan flights? These are decisions that fall directly under your jurisdiction. That's the first part of my question.

• 1710

In the same press release, you announce new competition between Air Transat and Canada 3000 for the United Kingdom and Germany. I must admit that's good news because of the competition Air Canada will be facing. I must recognize that's good news.

On the other hand, your news release specifies this will be a year-round service between certain points in Canada and different cities in the U.K.. What are these Canadian points? Are we talking Iqaluit-London or...?

Mr. David Collenette: According to the agreement we have with the United Kingdom, any city in Canada can be used for this service.

Mr. Michel Guimond: It's up to the carrier?

Mr. David Collenette: It's the carrier's choice. I suppose there might be a good chance that Air Transat, based in Montreal, might be offering flights to Germany or England. I don't know. We give the authorizations but the requests come from the carrier companies. It's the same thing for Air Canada's requests to serve Vancouver and Toronto towards Mexico City. If you have a problem concerning service between Montreal and Mexico City, I think you should be asking Air Canada.

Mr. Michel Guimond: Yes. However, when there were two companies, we accused your predecessor, Mr. Doug Young, of being unfair to Air Canada and of favouring Canadian. Now the question will be different.

In other words, the dominant carrier will be able to choose its destinations. For example, Montreal Airports has been asking for the Montreal-Rome and Montreal-Milan routes. In future, that will depend on what Air Canada decides. Will everything depend on Air Canada? The federal government will no longer have anything to do as far as—

Mr. David Collenette: Yes, because if Air Canada decides not to offer service to Italy from Montreal, the Canadian government will not prevent it from doing so. However, if Air Canada decides to offer service to Italy and requests that of us, my answer will be yes, as it will be for Mexico City.

Mr. Michel Guimond: But there are some rules, for example about the number of passengers, in order to get a second designation.

Mr. David Collenette: Yes. A few weeks ago, we announced that we were reviewing our international policy. However, in the case of flights between Montreal and Mexico City and Montreal and Italy, we now have a dominant carrier—Air Canada. It is up to Air Canada to provide service on these routes. Until a few days ago, there had not been a request for Montreal-Mexico City. Isn't that right, Louis? Mr. Ranger will answer your question.

Mr. Louis Ranger: In the case of Italy, the problem is that we are entitled to one designation for Canada. Canadian was doing Toronto-Rome, while Air Canada was volunteering to do Montreal- Milan, for example. However, the problem has now been solved, because we have a single carrier, Air Canada, which will be able to do Toronto-Rome and also Montreal-Milan. So we have solved the problem because of the merger.

Mr. Michel Guimond: I see.

To move now to the issue of the high-speed train and our committee's June 1998 report, are you going to be responding to the issue of the $51 million shared between Ontario and Quebec, Minister? Are you going to give us the federal government's position on the pre-feasibility study of the high-speed train?

Mr. David Collenette: The government's priority is to look at all the options for VIA Rail's current service with a view to improving it.

• 1715

When I announce the new policy on VIA Rail, I will be prepared to comment on high-speed trains. As I said before, everyone dreams about these trains, but we do have to be practical. Is it realistic to think that Canada can come up with the necessary funding for such an expansion at this time? I will be prepared to comment on the situation in a few months or rather a few weeks, when I speak about the future of VIA Rail.

Mr. Michel Guimond: You acknowledge in your notes that....

[English]

The Chair: Sorry, Michel.

Mr. Johnston.

Mr. Dale Johnston (Wetaskiwin, Ref.): Thank you, Mr. Chairman.

Thank you, Mr. Minister—or should I say “neighbour”. We're neighbours over at East Block.

I noticed today—just by sheer coincidence, I guess—an article in the Globe and Mail referring to the language commissioner enforcing bilingualism on Air Ontario, Air Nova, and all the regional carriers. I'm wondering if you would care to put forth an opinion as to how this will affect the regional carriers' case that Air Canada is indeed their common employer.

As you know, this is something the CIRB has been struggling with for some time now. Would you like to make any comments on that?

Mr. David Collenette: Well, as I said earlier, Mr. Johnston—and I don't think you were here for my opening comments—

Mr. Dale Johnston: No.

Mr. David Collenette: —I will not comment on anything that may or may not be in the bill before the bill is presented to the House, and I'm certainly not going to comment on speculation in the newspapers that may or may not be accurate. There's a lot of speculation on this file.

But I do remind you and the other members that this committee was very strong, as was the Senate, on the application of the Official Languages Act to the merged carrier. As you know, the government always tries to listen to the views of members and act upon those views.

Mr. Dale Johnston: Then perhaps I could get you to comment on what safeguards you have in place when we have the dominant carrier emerge. We don't really have a choice as to what airlines we take in Canada, and any type of work disruption, any strike or lockout, would virtually shut down the travelling public. I'm wondering if you have any plans as to how to deal with those eventualities.

Mr. David Collenette: It's a hypothetical situation—

The Chair: The problem we have, Dale, is that this may or may not be addressed in the legislation. That legislation will be coming to this committee as soon as we conclude second reading in the House. The minister will be invited to be our first witness so he can speak directly to all those issues surrounding the airline restructuring.

It puts the minister in rather an awkward position, then, to try to answer your question and not answer the question at the same time so as to not release the information about the legislation.

Mr. Dale Johnston: I appreciate that, Mr. Chairman.

In that case, I'll try one more that might actually fit into the same category—the trucking industry. As I'm sure the minister will know, there is a great shortage of drivers in the industry at the moment.

Do you have plans to address the concerns set out by the trucking industry at the moment regarding hours of work, periods on the road, or any of that stuff?

Mr. David Collenette: This has been a particular concern for us. Mr. Jackson, I think, has been the one whose staff members have been intimately involved. I must admit, I've been preoccupied by other matters, and I haven't talked to him about this for a while. Maybe he should give the answer.

Mr. Ron Jackson (Assistant Deputy Minister, Safety and Security, Transport Canada): Thank you, Minister.

The minister mentioned in his opening remarks that we do have amendments to the Motor Vehicle Transport Act as a bill that will be ready to come forward sometime later this year. The bill now is largely a safety act, and the main provisions of it relate to something called the national safety code, which is a series of standards to which all the provinces across Canada will ascribe to when the bill comes into force.

• 1720

There are two regulations that are made under the act, and one of those regulations deals with hours of work. The Canadian Council of Motor Transport Administrators, who are the provincial ministers of transport or ministers of licensing or whatever, has formed a number of working groups. One of the working groups has been dealing with this particular issue with interested parties like the Canadian Trucking Association and CRASH and other interest groups to come up with a consensus on common hours of service for Canada.

The Chair: Thanks, Mr. Johnston.

Mr. Casey.

Mr. Bill Casey: Thank you very much. We're off of Halifax and on to other things.

Does your department acknowledge or consider that there is a problem facing the smaller NAS airports? The ones I'm familiar with are Moncton, Saint John, and Fredericton. I know Saint John and Moncton last year both lost $1 million on operating revenue, and now they're faced with considerably reduced revenues from landing fees and terminal fees because of the merger. Has the department acknowledged that there's a problem there?

Mr. David Collenette: Certainly we're concerned about the effects of the consolidation of the two main carriers on smaller airports. We think with the larger airports we'll be okay, and we're going to examine that separately from the bill. We have to get along with getting the deal done and the merger completed, but there's no question that there will be issues.

In fact this falls from the question Mr. Hubbard raised with respect to Charlo and Miramichi, where they've lost scheduled air service and they counted on landing fees for certain carriers. Certainly we will be looking at all of these issues on the airports we have transferred.

Mr. Bill Casey: Another issue has come up. With the new schedule for Prince Edward Island, if every seat is filled on all of the planes scheduled for Prince Edward Island now and the number of passengers stays the same as last year, there are going to be 12,000 people left at the gate with no seat in the summer of 2000. When the airline mergers were discussed and some of your priorities and some of your conditions were set down, you set down regional service and maintaining service as priorities. Right now, with the new schedules, there's a dramatic shortage of seats to and from Prince Edward Island. How will you address that, or will you address that?

Mr. David Collenette: What the deal says is that Air Canada has to offer service to all communities currently served by Air Canada and its connectors and Canadian and its connectors at the time of the deal. So that deals with services actually getting service.

With respect to the number of flights, that has to be determined by the carrier based on the market. If you're telling me there are 12,000 more people expected to fly than there are currently seats for, I am sure Air Canada knows that. They want the revenues from those passengers, and they will put on larger aircraft.

What they have just announced is a very quickly assembled consolidation. I would assume they would increase capacity on certain routes in the summer for the tourist season. Where they may only have a turboprop or a BA-146, they'll put on a DC-9 and maybe even something larger. The Charlottetown airport is quite large; it accommodates 747s from Air France to take lobsters to France each Christmas. So it has the capability, but that's really a decision of Air Canada.

When Air Canada comes before the committee, these are issues you should address with them. They'd be crazy if they didn't try to satisfy a market that they know from past projections is there.

Mr. Bill Casey: Back to my first question, about the viability of the smaller NAS airports, would you consider applying a parallel program or a program similar to ACAP to those airports?

• 1725

Mr. David Collenette: This is all premature. We're just trying to wade our way through the merger and all the ramifications of the merger from the legislative and policy perspective. We are looking at the issue of airports because there are some genuine concerns.

The Chair: Thanks, Mr. Casey.

Ms. Meredith.

Ms. Val Meredith: Thank you, Mr. Chair.

Mr. Minister, in your performance report for the department, on page 17 you have made note that you “started work on a trade/transportation corridor policy framework”. I'm interested in when you're going to complete this report. It's on page 17, 3.2.1. It's just that you make mention of this trade corridor policy framework and that's a favourite topic of mine. I'm just wondering when you're going to complete the report.

Mr. David Collenette: I'll let the deputy answer that specifically in terms of the report. We have been working on a strategy to improve access to the various border crossings. One of the things I've emphasized to my cabinet colleagues is that if there's going to be money in this budget to answer the infrastructure program promised in the throne speech, then hopefully we will make the program flexible enough that we can put money into border crossings as one of the priorities.

On the specific study, I think the deputy can answer more explicitly.

Ms. Margaret Bloodworth (Deputy Minister, Transport Canada): Thank you, Minister.

The minister's right. This may well involve money, depending on what happens on an infrastructure. One of the things we concluded from some of our early work on border crossings, going back now two or three years, was that the issues were not all money. Some of them had to do with coordination of various services on both sides of the border. We've spent a lot of time in the last couple of years bringing together various departments in this town, but also provincial departments, who also have a role, and the American counterparts on the other side.

To be frank, for many of us a lot of this would be kind of boring work, but it is important in terms of making that work smoothly. That's what this is referring to. Yes, we would hope there is some money to deal with some infrastructure issues, but there are many other issues besides the money issues. We've tried to make a start on those before there is money.

Perhaps Louis would like to add something.

Mr. Louis Ranger: We have a document that is called “Transport Corridor Policy Framework”. As the deputy indicated, it's basically an indication that if the various programs that exist now were better coordinated, they could support a corridor policy. We certainly would be happy to share that with you.

We've also set up an interdepartmental committee. It's been in place since 1997. It has actually been quite active. Yesterday I was involved in a video conference with all our heads of missions in the United States. We were beginning to see the results of that work. They were all aware of the work of that committee. As the deputy indicated, there's so much we can do short of having funding. That framework does provide a process for decision making should we get some resources.

Ms. Val Meredith: I have a supplementary, Mr. Minister, and it relates to the answers you have given. My understanding is that the money for highways and for this type of programming will be coming through infrastructure programming. Is there not a chance to isolate highway development moneys or national highway program moneys as separate from the infrastructure moneys to make sure it doesn't get funnelled to other projects that are necessary but that are not precisely improving our ground transportation system?

Mr. David Collenette: I think you make a very good point, Ms. Meredith. One of the options being looked at is to have a separate transportation infrastructure program. That's really not my decision. That's one for the Prime Minister and the Minister of Finance, and it depends on the availability of funds.

In dealing with officials such as Treasury Board and finance, I've emphasized and my officials have emphasized that we need some flexibility on the transportation side. I've talked about this publicly before at the committee. As you know, the infrastructure program we had before was a third, a third, a third, but municipalities in Mr. Bailey's riding can't afford to give one-third of the cost to upgrade the Trans-Canada Highway, which is part of the national highway system.

Ms. Val Meredith: That's right.

Mr. David Collenette: So you have to look at fifty-fifty deals.

• 1730

Then there's the whole issue of allowing tolls for bypasses like the bypass around Montreal, where you have an alternate route that's free, sort of like a Highway 407 versus Highway 401 argument in Ontario. That means there have to be partnerships with the private sector. So we have to have some flexibility.

When you're talking about access to border crossings, it's the same thing. Should the City of Windsor be expected to pay for an access between the Ambassador Bridge and Highway 401 when this is a national trade priority that should really come under a fifty-fifty deal with the Province of Ontario? I think they should not have to pay that.

On the other hand, in areas like my hometown, Toronto, if the city council wants to determine that it needs to extend the subway from one of its terminuses to York University and to Highway 400 in the west end—the Spadina Line, as it's known—then obviously that would come under one-third, one-third, one-third of the traditional infrastructure.

Depending on the availability of funds, there's a lot to be said for having a separate transportation infrastructure component from a general infrastructure component that could cover other issues, such as cultural matters, sewers, and water purification. But that's not my decision.

Ms. Val Meredith: I think Canadians, and certainly the industry, look at the taxes they pay for fuel as a source of funding that they're not seeing going back into improving the infrastructure they require.

Basically, when you talk about roads, highways, and rail, you're talking about part of our ability to manage trade and to fulfil our trade relations with other countries, particularly the United States. It really is the ability to create wealth for our country that then can be put into the other infrastructure programs as needed. I think that argument is well placed.

If you have any idea of how we can assist you in trying to get some of that money that is taken out of fuel, the users of the transportation system are putting into it and want to see some return to improve the system. If we can help you with that, let us know how.

The Chair: Thank you, Val.

Mr. David Collenette: Well, make the case to the Minister of Finance.

There's no question that the proportion of moneys from fuel taxes that are spent on transportation has diminished over the last number of years. Up to about 1984, it was sort of at that level. There has always been sort of an unspoken deal that more is collected from fuel taxes than is spent on transportation. But beginning with Mr. Mulroney's government, and maintained under us, it has gone up like that. I'm not going to apologize for the Mulroney government, but the reason we kept it up there is because we were in a deficit position, and obviously those are general revenues. Unlike the U.S., we don't believe in designated taxes, or hypothecated taxes or whatever they're called in Britain.

Ms. Val Meredith: Maybe it's time to start.

Mr. David Collenette: We believe in all revenues going into the consolidated revenue fund, and government, in consultation with Parliament, deciding on priorities. So there's no question that fuel taxes support other expenditures, whether it's in the health care field or other social service fields, but that's the way governments work now.

Some of the provinces are taking a little bit different tack, and they're allowing municipalities to get one cent a litre, or whatever, from provincial fuel taxes. But if Mr. Martin were here, I think he would say he would not anticipate that being done at the federal level. Our only hope is to try to get at least more money than has been spent in the last ten years, for the next five or ten years.

Ms. Val Meredith: It was 3% last year.

The Chair: Thank you, Val.

We'll go to Mr. Solomon, and then we'll have two quick questions, one from Mr. Guimond and one from Mr. Bailey, and that will wrap it up.

Mr. John Solomon: Thank you for being so patient. I had to do a TV interview, and it went longer than I expected. I appreciate the opportunity to ask the minister some questions.

Minister, I'm from Saskatchewan, as you might recall, and I want to quote what you said earlier in your presentation. You said that we have talked about a national highway system, and we have a comprehensive plan for a national highway system and ports. From Saskatchewan's perspective, we're really frightened that you do, as it applies to Saskatchewan in the following way.

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There's been a rapid decline in the branch-line activity on the railroads for picking up grain from farmers. As a result of this branch-line abandonment—and it was through cooperation with the railways and the grain companies to have larger throughput terminals at farther distances apart—we've put additional pressure on our road system in the province of Saskatchewan. We have more miles of roads in Saskatchewan than in any other province in the country, and we only have one million people out of thirty million.

The roads were built for one-ton and two-ton trucks; they can carry those loads quite easily. But now with the longer distances, the farmers have to hire bigger units and they're actually competing with the railroads. Some of them are hauling their grain right to port on the trucks. Of course it's the only way they can save money, because now the majority of farmers in western Canada who are grain producers are basically share-croppers with the railroads. I have a community called Davidson in Saskatchewan. Farmers there have told me on a regular basis that when they ship out three producer cars of grain, one of the three goes toward transportation costs. So it's really almost a serf situation in many parts of western Canada.

We're very concerned about this, in particular when we've seen the transportation subsidies reduced as well. There are longer distances and higher throughput elevators to take your grain to. The Crow benefit has been eliminated—the transportation thing—and you've deregulated the railroads and all these other things. But on the other hand, you've continued to keep farmers regulated, because they pay the storage costs to the grain companies and the freight, and they have no guarantee of delivery on a certain date. So they take all the risk, pay all the freight, and yet they don't have the balance, in terms of federal subsidies.

I want to ask the minister two questions. Is there any kind of plan in effect in your department to address this growing inequity in western Canada that is helping to restructure agriculture socially, restructure communities? If there's no plan, the impact will be that the communities and all the infrastructure will collapse. The school systems, the recreation systems, all of the small businesses in the small towns are dropping like flies. The cost to maintain them cannot be maintained by the farmers that remain.

The second question deals with the national highway system. I know Val has made some representation to that. Canada trails all federal states in the national highway system in terms of money spent. We have the lowest level of capital and maintenance investment in highway infrastructure in the OECD—28 or 29 modern productive countries.

The Chair: Mr. Solomon, you'll have to get to your question, to leave time for the minister to answer.

Mr. John Solomon: With regard to the highways program and what's happening with the gas taxes, the federal government takes about $160 million a year out of Saskatchewan on taxes on fuel. It may be a bit higher, as this number is a couple of years old. Over four years, they've taken almost $1 billion out of Saskatchewan in taxes and put $2 million back in the province for highways. They take $140 million out of Manitoba on an annual basis, and put in nothing between 1998 and 2001.

The final point is that New Brunswick, Newfoundland—

The Chair: John, you're going to have to put your question.

Mr. John Solomon: —and Nova Scotia received two-thirds of the funding, whereas the four western provinces received 11%.

Mr. Minister, I'm wondering whether or not you can explain to the committee whether these inequities will remain or whether there will be some consideration of the extreme pressures on our economy out west.

Mr. David Collenette: Very quickly, dealing with the last question first, I find it odd that Mr. Solomon from the NDP is criticizing the federal government about fuel taxes, when Saskatchewan has the highest fuel taxes for road and rail in the country. I think this is like a lot of things we hear out of Saskatchewan these days: it's all the federal government's fault and it's not the provincial government's fault. I think he should talk to Mr. Romanow a bit about that, because Mr. Romanow—who is running a surplus right now—could certainly help.

On the general question of fuel taxes, I believe I answered that question earlier to Ms. Meredith.

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It's true the Canadian government doesn't put as much into transportation infrastructure as other G-7 countries, and that's because historically much of what goes to roads is the prerogative of the provincial governments. But for ninety years there has been a deal in which the federal government has funded highway improvements.

I've obviously been advocating more money going to roads, and hopefully we're going to get somewhere in the next budget. But it's really a model of governance in which the provinces have been the ones that have taken on more of this burden, versus say the states in the U.S. or other countries. In some countries such as France and Britain, which don't really have state governments, the funder is obviously the central government.

On the question of rural roads, it's a good point. At the beginning of your statement you made a rather eloquent appeal for reform of the grain handling and transportation system. I concur with your sentiments, and I look forward to the support of the New Democrats when we move with our proposals. I absolutely agree with you. This is a matter that has to be dealt with for the benefit of everybody in the system, but particularly the producers. This is a system that just doesn't work. There are inefficiencies. We have to release the revenues that pay for those inefficiencies, and those revenues have to go back to everybody in the system, but particularly to the producers.

As part of any package, we obviously have to take note of the wear and tear of the roads as a result of the gradual abandonment of the more remote branch lines and the building of these high-throughput elevators. We did give $350 million under the WGTA for transition. Much of that was spent in Saskatchewan. I understand Mr. Solomon is making the case for similar expenditures if we bring forward this grain handling package. It's a useful suggestion and one we certainly would look at.

The Chair: Thanks, Minister.

We'll have two short questions, one from Mr. Guimond and one from Mr. Bailey.

Mr. Guimond.

[Translation]

Mr. Michel Guimond: I would like to talk about the economic deregulation of the bus industry now, Minister. You say at the top of page 6 of your comments:

... I indicated last fall that—because of the lack of consensus—the issue should be referred to a parliamentary committee for further examination.

I'm sure you are aware that I sent you 1,527 postcards on December 14 from Quebec residents who are opposed to the proposed deregulation. I would like to tell you that I have 1,400 more, which you will be receiving this week.

I think you realized that the lack of consensus also came from the Quebec Association des propriétaires d'autobus and the Canadian Bus Association. Last week, our clerk sent us a copy of the letter from the Yukon Minister of Transport, Mr. Keenan, who has some serious reservations about this economic deregulation.

My question is simple, Minister. Can you tell us which other provinces, besides Quebec and Yukon, have expressed serious reservations about the economic deregulation of the bus industry in Canada?

Mr. David Collenette: I think the two provinces are Quebec and British Columbia. We will be preparing a document for your committee to focus the debate and identify the problems. I hope that with all the work you have, you will find time to examine this issue, to solve the problem and to give me some good advice about the changes that should be made to the system.

[English]

The Chair: Thanks, Mr. Guimond.

Mr. Bailey, please.

Mr. Roy Bailey: Mr. Minister, perhaps you can help me with a number of questions I have.

Both CP and CN have the only two crossings in my province, at North Portal and Northgate. With the proposed merger that's being announced and that's being negotiated right now with CN and the other company, does your department or the government have any role to play in safeguarding the merger of those two companies?

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What I mean by that is there's some concern that the moment CN has the merger, then of course CP, just a few miles away, will also find a merger there. That is of some concern. How would you address that if you were the member from Souris—Moose Mountain?

Mr. David Collenette: I'm not sure whether you were here earlier when I talked about this proposed deal. I'm not prepared to enter into the debate at this time—

Mr. Roy Bailey: No, no.

Mr. David Collenette.: —because it's rather complex. The department is still wading through it all. Mr. Manley's officials are wading through it. The Competition Bureau is wading through it.

The question you ask is a legitimate question. What does this really mean for rural Saskatchewan? We don't know yet, and we want to get an assessment on it. I suspect the bigger issues and problems are probably going to be in the U.S. rather than in Canada, but we have to be concerned with the health of the Canadian railway system.

It's ironic for a minister of transport to worry about the health of Canadian Pacific, given past history, because poor old CP has always been kicked around as a villain. But in this case Canadian National has decided to go in a certain direction that obviously will have ramifications for Canadian Pacific, and we have to be concerned with the health of both railways and what this deal may or may not do for transportation policy in Canada.

This is an issue we're going to come back to, but I would urge you to ask Mr. Tellier and officials of CN to come here and give their views. Then when I come back with the estimates, perhaps I'll have a bit more to share with you.

Mr. Roy Bailey: Thank you.

The Chair: Thanks, Mr. Bailey.

Colleagues, thank you for your questions.

Minister and assistant deputy ministers, thank you very much for appearing before our committee. We look forward to receiving the bill on the airlines, and we'll get straight to it as soon as we receive that bill.

Thank you very much, everyone.

Colleagues, we'll see you tomorrow morning at nine o'clock to set the priorities of the committee. Thanks.

We're adjourned.