STANDING COMMITTEE ON TRANSPORT
LE COMITÉ PERMANENT DES TRANSPORTS
[Recorded by Electronic Apparatus]
Tuesday, November 16, 1999
The Chair (Mr. Stan Keyes (Hamilton West, Lib.)):
Good morning, colleagues. Pursuant to Standing Order
108(2), we'll resume the study on the future of the
airline industry in Canada.
This morning we welcome
as witnesses in the 9 a.m. slot the Canadian
Airports Council. Joining us from the Canadian
Airports Council are the executive director, Mr. Neil
Raynor; the chair, president, and CEO of the
Winnipeg Airport Authority, Mr. Sigler;
and the vice-chair, president, and CEO of the
Ottawa Airport Authority could not make it this
morning, so substituting for Mr. Paul Benoit
will be Mr. Hopkins. Mr. Hopkins, you are
Mr. J.A. Hopkins (Chairman, Winnipeg Airport
Authority Inc., Canadian Airports Council): I chair the board of the Winnipeg
The Chair: Thank you very much.
Gentlemen, welcome to the Standing Committee on
Transport. We look forward to your presentation of
about 10 to 12 minutes, and then we'll get into
questioning. So when you're comfortable, please begin.
Mr. R. Neil Raynor (Executive Director, Canadian
Airports Council): Thank you, Mr. Chairman.
Mr. Chairman and hon. members of the standing
committee, on behalf of the Canadian Airports Council I
would like to say how very much we appreciate the
opportunity to appear before you today to talk about the
pro-competition stance of Canada's airport industry.
I'd also like to note that this is the first time
the Canadian Airports Council has made a submission
before the honourable members of the committee, so this
is a particularly significant event for each and every
one of us.
I know our submission has been circulated to the
honourable members, so I don't intend to repeat verbatim
that text, and I note that we have somewhere around 10
to 12 minutes for our verbal submission this morning
and then we'll be open obviously for questions, but
rather I will highlight the issues we think
particularly important for the standing committee to
What we, as airports of Canada have to offer, is a
distinctly different perspective.
Although today's submission was drafted in English, we have
prepared a French version for you.
So let me jump right in, and we'll start with just
some background on the Canadian Airports Council, which
represents local, regional, and national airport system
airports across the country, from St. John's,
Newfoundland, to Victoria, British Columbia, and
stretching across the north of the country through the
Airports the size of Grande Prairie, Alberta, to
airports the size of Lester B. Pearson International in
Toronto are all members of the CAC. In fact, over 95% of
all domestic travellers use CAC member airports to
start and complete their journeys safely and securely.
Mr. Chairman, the CAC is the voice of airports in
CAC represents airports of many different sizes, as
I've already indicated, in different stages of
development, and with different growth opportunities.
Clearly no one solution, no one size, is going to
fit every need. The CAC encourages the standing
committee to take account of these local differences
and to seek the views of individual airport authorities
in crafting solutions that we're here to discuss today.
However, we can state absolutely categorically at the
outset that CAC member airports are agents for
competition because of the benefits competition brings
to the communities and the travellers they serve.
The question before the standing committee today is
one that has been debated not only within Canada but
within the United States and across Europe. As I
mentioned, we recognize that airports have a role to
play in promoting competition both in terms of the
airlines that serve their communities and the
non-airline services provided to travellers. Airport
executives and their teams take those responsibilities
With me at the table today are both an executive
of an airport, a major airport of Canada, Mr. Murray
Sigler, who's also the chair of the CAC, and with a
community perspective, which presents the opportunity
perhaps for you to pose some questions on that level, I
have Mr. Sandy Hopkins, who is the chair of the
Winnipeg Airport Authority.
It's a little over seven years since the first of
Canada's major airports were commercialized. Devolution
of control of Canada's airports has been a major policy
initiative of successive Canadian governments. Our
experience is that the locally focused and accountable
airport authorities better serve their communities.
Those same communities enthusiastically endorse the
airports as economic generators in their region.
The principal aim of airport authorities, to maintain
a safe and secure operation while enhancing efficiency
and delivering cost-effective services, has been
achieved to a remarkable degree in a very short period
of time. The airlines now, by their own admission,
today have greater influence on capital investments and
acknowledge that airport management is focused on their
needs as never before. The only cloud in this
story—and it is a success story, and I want to stress
how successful the devolution process has been—is that
of the financial return the federal government is
extracting from the system, which is creating problems.
Transport Canada got out of the business of running
airports and in the process saved $100 million each and
every year. The federal treasury now receives over
$200 million in rent each and every year, and by simple
math we can see that's a $300 million turnaround in
five to seven years, and it's likely to increase. While
successful from the federal government's fiscal
perspective, that same rent extracted from the system
represents a dramatic increase in costs to airports and
In looking at the question before the committee today,
we agree with many of the views you've heard,
particularly from the Competition Bureau, that to
ensure competitive service new carriers must be able
to attain reasonable access to landing slots and
airport-based operating infrastructure such as ticket
counters, baggage systems, gates, and loading bridges.
Our detailed submission contains the rationale for our
position on these issues, so I'd like to take a
moment and very briefly look at each one of those
in turn before drawing a conclusion on our
recommendation of the way ahead.
In terms of the first one, slot control, it's very
much an everyday experience in the United States at the
larger airports, but perhaps that position is changing
there too. In the era of effective flow control by
the air traffic control system, slot control is often
viewed as reinforcing incumbent carriers at the expense
of new entrants, and I think we have to take note of
that. It's often viewed in the United States therefore
as anti-competitive. In Canada only Pearson has slot
control, although any airline that applies will get a
We wish to make two points with regard to slots.
First, from our airports' perspective, slots are a
public and not a private good. Our view is that they
should not be owned by the airlines. They should not
be available to be traded amongst and between the
Second, we believe that slots should be allocated on
the basis of clear principles, and in our paper we list
three. We believe that slots should be allocated to
foster competition on a basis of “use it or lose it”
and to reflect Canada's international obligations.
The second issue of airport facilities is that after
years of underfunding, the newly created airport
authorities are having to finance an abnormally high
system-wide series of capital programs right now. The
opening up of the transborder markets has reinforced
this need for investment. The financing burden created
by these essential capital projects, projects that
reflect the needs and wishes of the airlines
themselves, has partly been financed by a modest
increase in costs to airlines, costs that are still
below any objective observer's definition of
significant in terms of cost to the airline. By their
own figures—by ATAC's own figures—it amounts to no
more than 3% of their total costs. So operating
for all the airports in Canada would be less than
3%. I hope that puts that into perspective.
The airports across Canada are working very closely
with the Air Transport Association of Canada and
the individual airlines to conclude agreements,
including agreements with Air Canada and Canadian, for
the airlines to collect airport improvement fees
directly from the passengers. Again, this is used
as a source of financing for the future of that
essential infrastructure that's going to be in place.
In terms of those agreements, those so-called AIF
agreements, we believe that user interests are being
fairly represented and their views, the views of the
airlines, firmly taken into account in the development
and operation of Canadian airports, particularly in
regard to capital planning measures.
I'd like to turn to the viability of smaller airports.
CAC has consistently represented its concerns about the
financial viability of smaller airports in Canada to
the federal government. We've been doing it
consistently for the past two to three years through
meetings with the department.
While the specific
effects of rationalization—what we're here to discuss
today—will depend on the current service overlap
between the carriers at any particular airport, assuming
they already have competition in the markets, it
will depend on the size and operating structure of the
specific small airport and on the level of
discretionary versus non-discretionary passengers,
leisure versus business travel, and the availability of
So there are lots of parameters
that have to be taken into account in talking about the
likely effect on the small airports. But we do have
some recommendations, and I'll come to those in a moment
in terms of the smaller airport.
Lastly, but very importantly, although it may not
be immediately apparent, the level of crown rents is
significantly affecting airports' ability to address the
current competitive concerns. Rent paid to the federal
government significantly impacts the airport
authorities' financial viability and is seen, including
amongst the international airline community, as a hidden
tax, and is represented by bodies like IATA in that
All those issues are covered in our submission in some
depth. I would be very happy to pick up on questions,
but in terms of the time constraints I should move to
The federal government and honourable members are
right to be concerned about the potential for a
dominant domestic airline to abuse its contractual
obligations to thwart competition. However, in our
view, which is consistent with that of ATAC, the heavy
hand of regulation or reregulation is not the answer to
the airlines' current problems and should not be
Airport authorities are willing to participate in
helping solve the airline industry's restructuring
problems. The devolution of airports has created the
right conditions for airports to respond proactively
to facilitate a smooth transition and, to the extent
possible, ensure the consumer enjoys the best possible
service at reasonable prices.
So we would make the following recommendations on
those issues I mentioned earlier.
The airport rent burden has to be reduced to a
reasonable level, and we believe the federal
government should take some immediate action.
First of all, Transport Canada has to acknowledge that
it has a part to play to enhance Canadian airports'
fiscal ability to create a pro-competition environment.
As an indication of good faith, we believe that all
those rents, currently about $200 million, should be
capped at the 1999 levels. Transport Canada should
involve the industry in the development of a set of key
principles to actually decide on what is an appropriate
and fair level of rent payable to the federal government.
On the issue of smaller airports, which I'm sure is of great
concern to this committee, we believe that essential
services must be guaranteed to the smaller airports. We
believe that regulation, such as it may be imposed, must
not establish a de jure monopoly or restrict real
competition to any airport, whatever the size. The
federal government must increase the size and scope of
its capital assistance programs to those smaller airports.
On the slots issue, if slots are needed at Canadian
airports, and it is an “if”, they should remain in public
ownership and be managed by the airport authorities.
With clear rules for allocating slots, there is no
reason to create a new regulatory arm to deal with the
issue, and it is best left to the appropriate airport
authorities to manage.
Lastly, in terms of the facilities at airports, common
or shared-use facilities result in lower overall
capital financing and operating costs. Common use
directly contributes to decreasing airlines' costs at
airports and to enhancing competition. However, airlines
like to tie up such scarce facilities because of the
competitive advantage such action confers.
As part of the federal government's agreement to any
scenario that creates a dominant domestic carrier,
that airline should be required to forego its so-called
majority in interest rights under current agreements
and surrender to the airport authorities its rights to
facilities that could be converted to common or shared
use such as gates, loading bridges, ticket counters,
baggage systems, and common display systems.
The CAC believes that with appropriate incentives to
help it, such
as a reduction in the crown rent, more
airports would adopt such policies to provide those
sorts of facilities. They would have the financial
wherewithal to carry out that task.
Mr. Chairman, that is the
conclusion of our formal submission. We're available
The Chair: Thank you, Mr. Raynor, for your
presentation to the committee.
Just for some clarity
and for the information of the committee, I wonder if you
could quickly walk us through who determines and
how it is determined who gets what slots at an airport.
We've heard much said at this committee, especially by
those airlines that would want to compete directly with
a dominant carrier if there is one at the end of the
day. We've heard their desire, of course, to ensure there is
an availability of slots for them, especially during
prime time at Pearson or Vancouver International.
Mr. Neil Raynor: Mr. Sigler is going to pick
that one up.
Mr. Murray Sigler (Chair, President and CEO,
Winnipeg Airport Authority, Canadian Airports
Council): First of all, in Canada there really isn't an
issue of slots other than at Pearson, so you have to
put the whole Canadian scene in that context.
At all the airports where there are commercial air
services there's an airline operating committee that
all the airlines operating out of the airport
become a member of. They meet a couple of times a year
around the pending schedule changes to try to come to
an agreement amongst themselves on how the slots
relative to the gates and facilities at the airports
will be accessed, particularly the common-use ones. If
there's any issue between them, if they can't agree,
then the airport authority or the airport operator is
the arbitrator they fall back to.
In the case of Pearson, where there are and have been
slot issues around peak times more so than at
other airports, then there is an actual slot
allocation process there. There's a slot allocation
entity. It's really a notional party of one, an
airline person who deals with that. Again, if they can't come
to grips with
it, then it reverts back to the airport authority under
In all cases they've fairly well worked it out. The issue comes
up that we have a new carrier that isn't in the group at a
certain airport. They surface. Then they have to
join that committee and try to get access to it. Again,
they quickly become part of it, and it's in fact tended to work
itself out at all airports around the
country, even Pearson.
The Chair: At what point are we looking at
IATA in this equation? Apparently, it's IATA that is
involved in this slot protocol.
Mr. Murray Sigler: It's all under IATA. With the
carriers it's evolved under IATA. There are rules
that respect international obligations,
where international flights have priority to respect the
treaty obligations. So under the slot or gate
allocation rules the international flights take
priority, and then you get into the domestic flights.
There's a whole segment of rules on prioritizing
the allocation of them at Pearson.
We could get this information for the committee
if it was useful, Mr.
Chair. We could get a copy of how the Toronto mechanism
works for you today.
The Chair: We'd appreciate that. Thanks very much.
Mr. Dromisky, please.
Mr. Stan Dromisky (Thunder Bay—Atikokan,
Lib.): My first question concerns your concern
about deregulation or regulation. I'm sure
you're all quite aware of the five principles within the policy
framework the minister presented to the House.
Operating within that framework, if they become
applicable in whatever situation might arise in the
future, they're going to have a direct or indirect
impact on your operations. I'd like your comments
related to that.
The second area of concern I have is regarding
the 700 or so landing strips we have in this
country. Many of them do have commercial service, passenger
service, and you're advocating $105 million for those
airports. I have a big question mark regarding that
in light of the kinds of needs we're aware of
that many of these airports have. I'd like your
comments about that area too, please.
Mr. Murray Sigler: The first aspect was
how we might be affected by the impact of the current
Mr. Stan Dromisky: Just for clarification, Mr.
Chairman, those five principles could result
in definite regulations.
Mr. Murray Sigler: We endorse the five
principles that the minister has set out. They make
good sense. I think everybody involved in the
process should address those five principles. They're
sound. All those five principles have always
been part of airport and airline management in this
country. There's nothing new in that, but they're
crisply set out and they're good benchmarks to go by in
looking at any specific proposals.
Airports are at
the front lines of the airline wars.
We're where the battles are fought out and we have to
settle the aftermath of it too in terms of sorting out
the fray in terms of the facilities.
We're community-based organizations. We're public
bodies even though we're not-for-profit companies.
We're representative of our communities and we have
to deal with those facilities. We also have to deal
with any hostilities that might be there between
airline employees and so on in the wake of mergers or
how that affects overall service around our airport.
I think we're lucky in Canada that we have this
airport authority model in place ahead of this airline
industry restructuring. We have a structure
in place that's publicly driven, that's accountable at
the community level, and that is subject to the national
airports criteria for accountability and so
on to protect the interests. And it's done at the
community or regional level rather than on a national
basis. So I think we truly are allies for competition
and for sorting out the aftermath of any restructuring.
In terms of applying that to smaller
communities and the amount of public funding that may
be necessary to ensure their viability, I'll turn that
over to Neil.
Mr. Neil Raynor: Thanks for that question.
As I said during my presentation, we have taken
our concerns about the financial viability of smaller
airports in Canada to the federal government on many
occasions over the past two to three years. So this
would not be a new message that we're delivering to
In our view there is a nuance in terms of this program
called the ACAP, the airports capital assistance program.
The ACAP program is only for air-side
facilities; it's not for those
ground-side facilities like access roads and such.
It can only be applied for safety and security
measures on the air side.
Right now, we're trying to work within that framework,
and our view is that $105 million does it. At the
moment that part, that ACAP funding, stands at $35
million, and it clearly isn't enough for the unmet need
that's out there. Our view is that we've done this
proactively, and we believe the federal government has
lots of capability to actually make that appropriate
$105 million contribution.
Mr. Murray Sigler: I'm pleased to pick up on that,
We went airport by airport and asked each of the
airports what it thinks is needed. Many of the
smaller communities feel the current program
doesn't have the flexibility it requires, nor
does it have enough money
in it to really take it to airports that aren't now
eligible. Under the terms now, you have to
have scheduled air services to be eligible for any of it, so
we think the eligibility should be reviewed as well.
At the end of the day, there are capital costs and
operating costs that the airport has to handle. We
don't think the smaller airports are able to do all of
their capital requirements. They can't handle them.
They can probably handle their operating expenses on
user fees and whatever, but the capital side of it is
unknown. When you have to rebuild a runway or do a
major airside improvement, it comes in big dollars, and
more than can be sustained by whatever level of
activity there is at that community level. It then
goes back under the current model. If there are no
federal funds under ACAP, then it goes back to the
province or the city or the municipality that really
ends up owning and operating that airport.
The Chair: Thanks, Mr. Dromisky.
Ms. Meredith, please.
Ms. Val Meredith (South Surrey—White
Rock—Langley, Ref.): Thank you, Mr. Chair.
I am interested in the accountability of the airport
authority. Who do you have to account to for the
decisions you make on where the money's going to
be spent and how much is going to be spent in certain
Mr. Murray Sigler: We're
accountable on several fronts. Maybe Mr. Hopkins could
start with that one.
Mr. J.A. Hopkins: Thank you.
There are really two levels of accountability to the
question as you posed it. In the first instance, we
have a number of different accountability requirements
by law. We have accountability requirements built into
our leases with the federal government and into our
bylaw. We also have accountability within our
community, because the individuals on our board and on
the boards of the other airport authorities across the
country are nominated by community organizations, by
the municipal governments, and so forth.
The other part of your question was on how the capital
is spent at airports. In most instances, that is an
agreement that is reached between the airport authority
and the airlines at that particular airport. The
committee Mr. Sigler referred to a few moments ago
also addresses the capital requirements at the airport.
Murray, you may want to pick up on that and provide a
little more detail in terms of how that process
Mr. Murray Sigler: On these AIF agreements,
Mr. Raynor mentioned that Kelowna, Calgary, and Winnipeg
were the first three airports to put them in place.
There are about 11 or 12 airports that have
them, and about 15 will soon have them. It's
becoming a bit of a benchmark. In signing the
agreements within the airport, the ATAC and the airline
industry, there's a process required, a formal
involvement by the airlines and the capital projects,
and there are checks and balances. From an airport
authority perspective, it's good because it's a sanity
check in terms of what they're proposing for capital
works. From an airline perspective, it's good because
they have their input and it gives them some control
over the fear of a spendthrift, out-of-control airport
authority surfacing somewhere where there's nowhere to
We're working closely now with the airline industry,
ATAC, to come up with some formal type of an appeal
that would be open to an airline to challenge an
airport authority on its rates. At the end of the day,
if it still didn't feel the process was fair and that
it wasn't cost-based, if it didn't follow ICAO
principles, the airline would have an appeal mechanism
somewhere. So we're trying to work an agreement with
ATAC, and we're now quite close to one that would
provide that kind of a mechanism.
Ms. Val Meredith: Is there not flexibility in the
administration of the airport authorities so that you
don't end with the same mindset for a medium-sized
city that you would for a small town? Is there
flexibility in how you operate, how you collect airport
improvement fees, how you charge your users so that you
If you have an airport that has three planes landing
in a day, I don't think it would require the same level
of service as an airport
that has a hundred planes landing.
Mr. Murray Sigler: I think it's the
real, underlying merit of the current system. From a
federal government perspective, the policy has been
successful in its objectives. From a community or
regional perspective, it allows a site-specific
approach. The AIF agreement with the airlines
provides some consistency for an airline that has to go
into different communities. For those customers who
are flying, there's some consistency in approach.
Under the agreement, there's only a single AIF rate, so
the $5, $10, or $15 rates are replaced with a single
one. It's up to the airport authority and the airlines
to agree what the rate ought to be for, say, Winnipeg,
whether it's $5 or $10, but there aren't three or four
different rates. The collection methodology is then
consistent and an airport authority doesn't have to
have any rate.
While we're here, I should mention that you can
equate directly the amount of rent airport
authorities pay to the federal government to the amount
of AIF. If you look at Vancouver, they pay about $60
million this year in rent, and there is $60 million
collected from their AIF. It's the same thing if you
look at Ottawa or if you look at Winnipeg's case.
There's a direct correlation from what's been bled off
Ms. Val Meredith: What's the basis of the rent
you're paying to the federal government? Does it
equate to what you take in on AIF, and they then just
take it from the airport authority?
Mr. Murray Sigler: No, it just ends up working out
that way because the rent mechanism was set in place at
the time the airports were transferred, based on
historical figures of activity. The way the airports
have grown, the way the traffic has grown in Vancouver,
Calgary, and other airports across the country, it has
been a windfall for the federal government. Apart from
the capital benefit, it has been a windfall on an
operating level. In effect, that amount is what the
airport authorities are now having to raise through
Ms. Val Meredith: But how does the federal
government collect the rent? What is it based on? How
does the government determine how much rent Vancouver's
going to pay versus how much rent Calgary is going to
Mr. Neil Raynor: It's actually done
on a site-by-site basis. It's not done—
Ms. Val Meredith: Is it volume of planes? Is it
volume of passengers?
Mr. Neil Raynor: It's a forecast of revenues.
Honourable members, I recently joined the Canadian Airports
Council as executive director. Prior to that, I
was executive director at the Halifax International Airport
Authority, and my responsibility was to negotiate
the financial terms of the transfer. From sitting at
the table with Transport Canada, I can tell you that
the way they develop their rent is by looking at their
historical data. They then project it ahead and say
that if they were to continue operating the airports
for 60 years—because these leases are 60 years
long; they're 60 plus 20, as a matter of
fact—how much money would we make? That becomes what
they call the base rent.
The federal government has said that if it continued
to operate these airports, this is what it would make.
Therefore, it has said it will take that from airport
authorities because it believes the airport
authorities can do better than that. The government
has also said that if the airport authorities do better
than that, if their bottom lines—these are
not-for-profit entities, you have to remember—go into
surplus, the surplus gets ploughed back into the
business for those capital programs Mr. Sigler was
talking about. The federal government says that if the
airport authorities do create any surplus over and
above what the government is taking in, in that base
rent that is its assumed rent, its assumed revenue,
income for the federal government, then it will
participate in that upside as well. That participation
could be up to 35%, and this is creating a huge wedge
of potential costs for the airports in the future.
Mr. Murray Sigler: What the airports are proposing
is replacing the current complex mechanisms with
something that does have a rationale to it, so that
basically they're on a cost-based approach that is
based on what the federal government had invested in
airports at the time of the transfers or on the market
value of it at the time. But there has to be some
rationale for the return, because for the excessive
amounts the number is a staggering one.
The total amount is $1.3 billion. That's what is
going to be paid in rent by the airport authorities in
the five-year period beginning in 1998. That's a
windfall. It's great from the fiscal policy
perspective of the federal government, but that's a
huge drain on the system. I can't speak on this
because we haven't discussed it as the board for all
the airports, but in the case of our own, if we had a
rent decrease it would be passed on directly to the
airlines in the way of savings. I think that would be
the case for most of the airports.
The Chair: Thanks very much, Val.
Mr. Sekora, please.
Mr. Lou Sekora (Port Moody—Coquitlam—Port
Coquitlam, Lib.): Thank you very much. I'm sorry I
came in a little late, but I had a caucus meeting.
You're talking about rents that are too high. You're
talking about the $100 million and the $200 million,
and you said they were way too high. I want to get a
handle on this. In your opinion, what would you see as
more sensible, more reasonable? What kinds of figures?
Mr. Murray Sigler: We want to get
precise about it, based on some book value of the
assets that are involved and on a fair economic return
to the Government of Canada as well. We want to work
that through with Transport Canada. For starters,
though, we do think that if they are capped at today's
levels of about $200 million a year, that would be a
fair return for ballpark purposes.
The way the leases are now structured, today's levels
of $200 million will grow to about $280 million over
the next three or four years, and they've already grown
over the past few years. At the very least, we could
just cap them where they are today.
Mr. Lou Sekora: When you talk about capping them
where they are today, you mention that the rents are in
fact too high, along with a few other things. Yet
you're saying to cap them at a 1999 level. If that
level is too high, why would you want to cap them at a
Mr. Murray Sigler: In an ideal world, we wouldn't,
but there's an air of practicality in terms of
something that's easily digested. It can be quickly
implemented and can at least provide some basis for
planning going forward by both the airports and the
airline community. It's a simple way to start it, and
then we could continue to work on the bigger question
of what is the right formula going forward. Ideally,
though, it should be reduced for sure.
Mr. Lou Sekora: But the fact is that 1999 levels
are too high, so why would you want someone to struggle
at the 1999 level for two or three years before it
starts making some sense?
Mr. Murray Sigler: I agree that we wouldn't, but
the way that machine works, if we don't cap it there,
we're going to face the 2000 levels and the 2001
levels. Before you know it, we're going to be talking
about a level that's 50% higher than where we are
Mr. Lou Sekora: You all talked about small
airports and their financial viability, and I want to
get a handle on that. In British Columbia, where I
come from, airports that have 600 acres of land to them
are being devolved to the
cities. Why would
that make a lot of sense to a city? I was a mayor for
many years in a city, and I would have loved to get 600
acres of land next to the airport and be able to do a
few things with it. I wouldn't want it all in one way
on a few other things, but I could surely put in some
industrial buildings and housing there. Why
wouldn't it be a big windfall for a city?
Mr. Neil Raynor: I can start that
Of course, many of the cities and smaller communities
that have taken on these airports see those
opportunities. One of the agreements with the federal
government is that, certainly for the foreseeable
future—10 years or whatever—you'll maintain that
site as an airport, because that's what it was. It was
often transferred for a dollar, because there were no
underlying revenues in those airports. You will
continue to operate it as an airport, but there are
opportunities for development, be they light
industrial or be they perhaps even housing around an
airport—although I hate to think of that, because it
always becomes an issue; you only have to look at
what's happening in Toronto.
But there's a balance here. In some communities, the
airports—and the airport in Ottawa is a very good
example, and Ontario also has other very good
examples—have taken a huge hit in terms of property
tax. It's the second-largest cost of many airports
after the federal rent, particularly in Ontario right
Mr. Murray Sigler: I think you're right, though.
The municipalities strategically want to pick up the
airport property from an overall municipal and even
regional planning area. It makes sense for the
municipality to pick up those airport properties.
They take some comfort in it being transferred from
the federal government, but it's a capital burden
still. Unless there is some hot industrial market, it
becomes a burden for the capital costs of the safety or
the airside runway reconstruction costs. Those are a
pretty big pill for most smaller municipalities to
swallow, so I think they're looking to find some
capital relief from the federal government for the
airport operations side. And if they are successful in
developing the lands around the airport, that's great
news for the municipality.
Mr. Lou Sekora: So I guess what happened before,
when the federal government owned these airports, was
they paid a municipality a grant in lieu of taxes,
on a commercial rate or whatever it is. That would be
much higher when compared to residential rates, and
that's where the problem comes in.
Mr. Neil Raynor: Also, elements of the
airport—for instance, the runways under the GILT
valued, but they are now. That's creating significant
problems, particularly in Ontario but also across the
country. The communities have taken on these
facilities. They mustn't gouge them.
They're there, and they can drive the economy of
their region. But many of those smaller airports are
not generating significant revenues after costs.
Mr. J.A. Hopkins: The airports are subject to
reassessment in each of the communities whenever that
process occurs in the community.
Mr. Lou Sekora: I see this as being a problem for
all sides. If there were an airport in my city and I
tried to tax them at a residential rate rather than
a commercial or industrial rate, whatever it may be, I
know that I'd be challenged in court and I'd lose. So
that's the problem. I think that's where the problem
lies in that municipalities have no other choice
but to charge them on the rate they fall under.
Mr. Murray Sigler: I think it's more of a problem
here in Ontario than anywhere else.
The Chair: Thanks, Mr. Sekora.
Colleagues, it's my job as chair to sometimes point
out a few things. While the discussion is very
interesting, we want to try to bring the questioning
around to the terms of reference that have been set
for the committee. There is a bit of a bootleg going on
here by the Airports Council vis-à-vis the fees
they pay, etc. There were a couple of mentions in their
presentation vis-à-vis their dislike for reregulation
and slots. But perhaps we can try to twist it back to
the terms of reference of the committee so that we can
get something useful for our report.
Mr. Guimond, please.
Mr. Michel Guimond (Beauport—Montmorency—Côte-de-Beaupré-Île-d'Orléans,
BQ): Mr. Chairman, I have a question concerning
landing slots, which ties in with the committee's mandate. However,
before I put my question, I have a comment to make.
I've noted that in both your oral and written submissions, you
act a little like King Louis XIVth, who was called the Sun King
because the sun never set on his empire. I remind you, because you
seem to forget it, that the airports handed over to you to operate
were paid for, financed and developed by Canadian taxpayers.
You entered into this arrangement of your own free will. No
one put a gun to your head or forced you to sign the agreement. I'm
not about to shed a tear for you and I'm not interested in finding
out whether you are making money or not. Remember, you received
something from the taxpayers. As a democratically elected
representative of the people, I think it's my duty to put things in
their proper perspective.
Here's an example of a statement in your submission which
highlights your tendency to overlook certain facts. In your
submission, which doesn't have numbered pages, you note the
following about airport facilities:
New infrastructure has generally been built on a common use basis,
financed by the airport operator.
To "financed by the airport operator", I would also add "and
by the $10 airport user tax". You have to realize—I won't say that
you have to honestly acknowledge—that passengers helped to finance
these facilities through the $10 tax they paid. In any event, you
referred to the airport improvement tax. These are the kind of
statements that make my hair stand on end. Moreover, I have trouble
at times keeping my emotions in check. When I hear statements like
this, I almost blow a gasket, if you pardon the expression. That's
all I wanted to say on that subject.
Now for my question. The committee heard from representatives
of charter airlines that offer charter flights. I think we can
agree that this is one possible solution to maintaining competition
within the industry. They realize this and have told us so. The
committee also realizes this and I think this should be included in
However, a word of caution is in order. No agreement will be
possible if the government moves to amend the 10% rule.
The charter airlines have told us that all carriers want to
land at Pearson at 8 o'clock, at Dorval at 8:30 and in Vancouver at
the end of the day. Everyone wants to fly, but no one wants to land
at Pearson at 11:30 at night or at 1:30 in the morning.
In your submission, you note the following: "With clear rules
for allocating slots...". I agree with you on that score, but since
I'm still considering the matter and I wouldn't want to have either
officials or people from the minister's office suggesting these
clear rules to us, could you, as an expert in the subject of
landing slots, suggest some clear rules to us? What should these
The Chair: Thanks, Mr. Guimond. The question was
exactly five minutes long.
Mr. Raynor, do you want to respond to that, please?
Mr. Neil Raynor: Can I just address your
comments, sir, which were very well made, and thank you for
One thing we've said consistently is that we recognize
that these facilities were developed and paid for by
Canada's taxpayers, and we're among them. The federal
government did a tremendous job in priming the system
when the industry couldn't do it, and that's important
to note. We accept that.
We also accept that we have
to pay rent on these facilities, unless we totally
privatize the system. That's another debate, but not
for today. We accept that we should pay rent.
Our argument is that we should pay a fair rent and a fair
return, and we believe it's not fair. It has become
a usury rent right now. So that's our argument. We
don't disagree with many of your comments.
If I can turn to the landing slot issue, we've said in
our paper that the primary principle is that whatever rules
are developed in terms of slots, if indeed we need to
have slots at Canada's airports, we must ensure
that it fosters competition. We must ensure that if in
a rationalization of the airline industry a
dominant carrier emerges that perhaps takes over one of
the other carriers, in some way it has to divest itself
of the slots the airlines would see as being
transferred as part of that process.
Mr. Murray Sigler: If I can just interrupt you for
a second there, Neil, that reflects the history of
where it's at today. Canadian and Air Canada combined
totally dominate each airport across this
country. In the scenario where
Air Canada acquires Canadian in one form or another,
having them pick up all of Canadian's leases and
commitments and say they're now Air Canada's would
leave the airport authorities unable to deal with
making their airport facilities available for other
airlines to come in on some basis. It wouldn't just be
the percentage of market that's controlled by Air
Canada. They would dominate and control every airport
in this country. So that's what has to be addressed.
Today each airport has different contractual
Mr. Neil Raynor: When we talk about slots in a
formal sense, we're talking about landing slots. But
if you wanted to expand that definition, it would
include those things Mr. Sigler has referred to and we
referred to in the paper, such as check-in counters.
If one airline owns all the check-in counters in your
airport, where does the new entrant go? It has nowhere
to go. So those lease terms have to be reviewed as
well, we believe, as part of this process.
The Chair: Thanks, Mr. Raynor.
Mr. Jackson, please.
Mr. Ovid L. Jackson (Bruce—Grey, Lib.): Thank you
very much, Mr. Chairman.
I'm still going to stick with what is the public
interest and how can we best serve it. I think it's a
matter of balance.
These whole discussions are arbitrating
among people competing for more resources,
and I guess it is an important exercise that one group
looks at the other group to see who's making a dollar
and how they can get hold of it.
What is perplexing is, as a government, when we're
losing $100 million, we're inept and stupid;
when we make $200 million, we're gouging. We
get the air navigation people who say, privatize us
and things will work out all right. Then they've got
the legal strike that can shut the whole thing down and
control it. Not only that, but the $1.3 billion that
was supposed to be passed on to the customer is not
We heard from ATAC this morning. They told us that we
are gouging, for example, with their landing fees every
time they land an aircraft. There's nobody regulating
us, and all of a sudden the prices go up exponentially
from $75 to $500.
We're compared sometimes to the United States. When
you want to compare yourself to the United States on a
world market, they control 47% of the share; the
Japanese about 11% to 13%; the Europeans 26%. We're at
2%. We produce 3% of the knowledge base in the world
as well, and stuff like that. So when, as Canadians,
we talk about our taxes and how much we pay, we must
take into consideration our population, our remoteness,
and the good quality of life we have. They say it's
excellent. It has made us number one in the world.
So it comes back that there are going to be limits to
growth. I mean, you can't grow and grow, having more
aircraft and then clogging the skies. That's going to
become a problem. So what you end up with is these
alliances, having these slots, and having small
airports feed into the big ones, and then the big ones
make the money. Municipalities that have large
airports... Let's take Mississauga, for instance, where
Pearson is located. They have about 20,000 employees at
least. So they do benefit from these airports.
The Chair: Do you want to wrap it up there,
Mr. Ovid Jackson: Yes. The question I have,
Mr. Chairman, is that I think we need to get from these
airport authorities exactly where their revenues come
from and why. I mean if there are security
arrangements, for instance, in terms of how you move
people around, or radar detection systems, and so on.
I want to have a look at what you're doing, so we can
see...because a lot of people are saying you're passing
on a lot of costs that are unnecessary.
The Chair: Mr. Sigler.
Mr. Murray Sigler: We're a not-for-profit
organization, our books are open, and we make
full disclosure of all the financials, not only to the
airlines but to our communities. We'd be pleased to get
you the financial information that you need on any of
our airport authorities so you can take a look at them
yourselves and draw your own conclusions.
But I agree, it's a balancing act. To have a
competitive airline industry you need the airport
infrastructures in place to serve those airlines, the
airlines have to be able to access those airports, and
we have to work closely with Transport Canada along the
way. It is indeed a balanced approach that's needed.
Mr. Ovid Jackson: Mr. Chair, I just want to make
this small point. The government helps to pay for
environmental damage. The government has to pay for
security—sometimes they would ask us for the RCMP.
The Chair: No, that's not correct Mr. Jackson.
Mr. Ovid Jackson: Okay, but they're also asking
us to build smaller airports as well. Where is that
money coming from?
The Chair: Mr. Sigler.
Mr. Murray Sigler: Those areas have been shifted
right to the airport authorities. We have to provide
the security and policing at the airports.
Environmental responsibilities have been shifted to the
airport authorities. So again, it's part of the
success from the federal government point of view of
downloading liabilities and financial responsibilities
and getting a great windfall.
The Chair: To be fair, probably to both
players, it's been a learning curve here. We're at our
infancy when it comes to the devolution of what we've
done on the airport side and what you people are
learning through this process in order to make it work.
Mr. Murray Sigler: I agree, Mr. Chair, and right
now there is a review. The reason we're looking at
these is not to shirk contractual obligations, as
might have been hinted at. It's because there
is a review taking place, and we're party to that, as
are ATAC and the communities.
The Chair: Thank you gentlemen.
Ms. Desjarlais, please.
Ms. Bev Desjarlais (Churchill, NDP): I have a couple of
questions, and aptly, Mr. Jackson's points are exactly
that. It was like going into another world when we
went from that meeting to this meeting. One was
accusing the other of doing this, and ultimately, if
you get right down to it, both think the government
shouldn't charge anything, pretty much, for utilizing
But as far as airports in the U.S. go—because we
often do compare to the U.S.—what are the rents that
would be paid there?
Mr. Neil Raynor: The model in the U.S. is very
different, because generally the airports in the U.S.
are operated by the municipalities. It's a direct cost
on city hall. So it's a completely
Mr. Murray Sigler: But at new airports like Denver,
which is the one new airport that's been built in the
United States, the rates are exorbitant. I don't know
that we can get the numbers again, but it would be a big
multiple of what anyone would pay at Pearson or
at Vancouver's new airport facilities.
Mr. Neil Raynor: But if I could just go back to
your question of what rent was paid to the
municipality, or the U.S. state or—
Ms. Bev Desjarlais: What types of rents would
the authorities, as such, pay to whomever—
Mr. Neil Raynor: In terms of lease
rent, not in terms—
Mr. Murray Sigler: They don't have that model.
They're owned by the municipality.
Mr. Neil Raynor: Yes, it's a completely different
Ms. Bev Desjarlais: Okay. So in essence there are
taxpayers' dollars operating the facility.
Mr. Neil Raynor: In the United States? Yes,
Mr. Murray Sigler: But there's a federal program
as well that's available to all airports to subsidize—
Ms. Bev Desjarlais: Okay. So there are federal
moneys that go into—
Mr. Murray Sigler: There's a large federal
program. It's complicated, but it's a whole different
Ms. Bev Desjarlais: So no matter how you look at
it, the government in the U.S., whether it be
municipal, state, or federal, puts money into their
airports. So in some cases, we're going to see a
situation where that's the reason it might be cheaper
to go into those areas, or, in the case of Denver,
theirs is higher because of the development
Mr. Murray Sigler: The high cost of that
development is passed on, but there's a PFC
program, as they call it in the States, which is
equivalent to our AIF, which the federal government
Ms. Bev Desjarlais: I had another question for you
here, and I've got to find it.
You indicate that, say, in Vancouver, $60
million is being paid, and I believe it's fairly
high in Toronto as well. What would you see as fair
market value? Looking at the land that's incorporated
into the airport, the runways, and everything in the
infrastructure, if you were buying or renting property
in Toronto, what would you pay for that amount of land
Mr. Murray Sigler: The rent that Toronto will pay
as its lease payment for the current year is going to
be just under $120 million.
Ms. Bev Desjarlais: In the city of Toronto, though,
what would you pay?
Mr. Neil Raynor: I'm sorry, we don't have that
sort of data. All we're saying, going back to our
rent, is that we agree we should pay rent, and it
should be a fair—
Ms. Bev Desjarlais: How can you justify saying,
we believe we should pay fair rent, when you cannot
tell me what the real estate value of that property
would be in the city of Toronto?
Mr. Neil Raynor: Because I don't have that detail,
Ms. Bev Desjarlais: How could you make the
Mr. Neil Raynor: —but we could determine—
Mr. J.A. Hopkins: There is a key principle that
has been missed in the discussion on rent.
As we have said several times, we fully agree with
the principle that airport authorities should be paying
rent, because the facilities we received at the
time of transfer were paid for by the taxpayer and a
return on that investment is required.
But if you subscribe to that principle, then you
should also subscribe to the principle that over time,
given that the airport authorities, from the day the
transfer occurs, put all of the capital on an ongoing
basis for both maintenance and new development into the
airport authority... The federal government puts not
an additional cent into any of those facilities. So at
a point in time, the federal government has been repaid
entirely—the taxpayer has been repaid entirely—for
the investment that was received at the time of
transfer. And all of the investment that's in the
airport authority at that point has been paid by the
airport authority through the surpluses it manages
as a result of fees less expenses.
Yet the rent formula, as it's constructed, sees the
federal government's share increase over time, rather
than decrease. So the economics associated with the
payment of rent are inverted. Rather than following
market principles, it follows the opposite of market
principles. And that is our argument.
Ms. Bev Desjarlais: To go back to Mr. Guimond's
point, you signed a contract knowing all that ahead of
You're here now suggesting that you're paying an
unfair amount, but you cannot tell me what the fair
value would be within the city of Toronto. So I have a
hard time believing you've really looked at the whole
picture; rather, you're just kind of ticked off
that you're having to pay that money.
Mr. Murray Sigler: The net value Transport Canada
put on their books, which they were using at the time
of the negotiation of the transfer, was about $300
million for Toronto. I told you what rent they're
getting for this year. You can draw your own
We're not saying we're not going to live with our
agreements. We're saying there's an aviation industry
in financial crisis here in this country. The
airlines are saying they can't afford the charges
they're paying. They're saying they need facilities.
We're saying there's a drain from the whole system now.
The subsidy from the federal government has been
replaced by a windfall.
Let's look at the total economics of the system.
Mr. J.A. Hopkins: This is the power of money.
We're community organizations; we're not-for-profit entities.
So this isn't our money that we're complaining about
The Chair: That's it, Ms. Desjarlais; your time
Mr. Comuzzi, please.
Mr. Joe Comuzzi (Thunder Bay—Superior North,
Lib.): Thank you and good morning, gentlemen. We've
heard evidence that the largest single subsidy in the
Canadian aviation industry is the rent that is charged
to airports or airlines in order to operate a business.
So when we sit around, Mr. Chairman, and talk about the
fee structure or the rent structure, I have to tell you
folks, it's not going anywhere with this part of the
committee. Maybe we should, through our study, look at
the whole Airports Council and perhaps wonder whether
it shouldn't be restructured too.
I wasn't at all happy with your answer to Ms. Meredith
about your accountability. When airports were
evolved, they were called local airport authorities
and we thought your accountability would be to the
local communities. I'm advised, and know through personal
knowledge, it's really not the case. You're not
accountable in any way, shape, or form to the local
communities you're supposed to represent. I just make
that statement and I'd like you to address it before
the end of this session today.
We have two different agendas. We've got an airline
industry that I gather is more concerned about the
global consequences of feeding passengers into the
large hubs in different parts of the world; that
seems to be their motivation. Air Canada and
Canadian are both the same. Yet we have a committee,
I think, that's trying to ensure equity and fairness to
the Canadian traveller. We're at different ends of
Our concern is the Canadian
traveller; we're not concerned about the global entity.
I want to know what your position is. Is your position
to look after the equity and fairness to the Canadian
traveller, or is it to satisfy the airline that the
global entity is the end result of what we're trying to
The other question I have is, I want to know where you
get your money. I want to know where you get your
revenue, where you derive your revenue, and how you
base these fees that are at some airports, to get into an
airport to use it, and other airports don't have it.
Thank you. Those are my questions.
Mr. Murray Sigler: On the accountability question
for the airport authorities, the current government after the
1993 election came out with what they called the national
airports policy. They took the original airports
policy that had been initiated by the prior
government and took a look at the issue of
The new national airports policy had the
accountability principles set out clearly, which were to
deal with the concern that airport authorities have to
be accountable to the communities the airport is
located in. Agreed, that's the objective of the
There are different ways that's addressed. It starts
with the policy itself, which sets out requirements for
disclosures of information, public meetings, public
inputs. The nominating entities that nominate to the
boards of airport authorities are the community
organizations. They're the municipalities, by and
large; they're the provincial government, and also the
federal government. They're the nominating entities.
So there's accountability through the nominating
entities. We don't have shareholders; we
have nominating entities behind us, and they're all
take another look at our accountability through the
lease agreements we have with Transport, with Her
Majesty. There are something like 1,200 pages of
documents; that's accountability to a large degree.
A lot of it is
financial formulas, but there are all kinds of rules and
restraints that are put on airport authorities.
We're also incorporated under the Canada Business
Corporation Act, another federal legislation that, as
companies, we make disclosures. We have to abide by
the corporate requirements for disclosures.
In addition to that, all the airports across the
country looking at their practices have pretty much
adopted the TSE guidelines for disclosures of
companies. Even though they're not shareholder
companies, they have adopted the TSE guidelines.
The Vancouver International Airport Authority has put out a
corporate disclosure document with its annual report.
In Winnipeg we disclose the same as if we
were a publicly traded company. So there's a lot of
disclosure, a lot of accountability, and I would
suggest a lot more accountability to the public and to
the communities than there ever was when Transport
Canada operated those airports. There's a much higher
degree of accountability now.
There's also much more
input by the public, by the consumers, by the airlines,
in the planning and development process at every
airport across this country. It's a much more
effective model from the element of public
accountability. We're much more accountable than any
airline in this country is.
That's another aspect I'd like to emphasize. Having an
airline that dominates 65% of the market come and talk
to us about accountability to the communities we serve
is a bit of an insult, I think, to community-based
bodies. So you say review the airport authority
structure because we're not accountable. We're not
private bodies. We're community-based organizations.
Mr. Joe Comuzzi: Get back to the next question.
Mr. Murray Sigler: Well, that was your first
Mr. Joe Comuzzi: Yes, thank you.
Mr. Murray Sigler: The second question was the
revenue question. Again, it varies site by site, but
basically probably 60% to 65% of the revenues are
derived from the
airlines in terms of airline landing fees, terminal
charges. That's kind of the traditional break.
Probably today 25% to 30% comes from airport
improvement fees, which are used for capital projects.
Then it's rounded out by
concessions, the retail parking concession, revenues
from the retail activities at the airports, and in some
airport cases there's land development initiatives that
are taking place. Again, it's quite a diversity, and
we'd be pleased to provide you with each of the
airports' financial statements so you can take a look at
The Chair: Thank you, sir.
No, time's up. You can ask directly which airport you're
Mr. Joe Comuzzi: I'm interested in all of
Mr. Murray Sigler: We'll give you the ones
we have and if there are others you're interested
in, sir, we'd be pleased to try to get those.
The Chair: Mr. Casey, please.
Mr. Bill Casey (Cumberland—Colchester, PC): Good
morning. I have a question about regional airports,
which has always been my focus on this because I come
from a region of Canada that's all regional airports,
The minister, in his five principles, laid
out the conditions for the new airlines that said
regional air service must be protected.
If regional airports can't survive, how can the
minister impose on regional airlines that regional
service be protected? What's your thought on that?
Mr. Neil Raynor: Well, I think there's a
linkage because none
of the airlines can operate without the infrastructure
in place. What we have to ensure is twofold. One
is the economic viability of those airports long-term,
and the other is that the airlines continue to serve them
and they don't, as a part of rationalization, pull out
of those small communities. That's the position
Mr. Bill Casey: We had one presenter earlier say
they estimated that 10 to 15 airports in Canada
right now are not viable even before reductions in
revenue come in and even before the new emergency
measures standards are applied. Is that about right?
Are there 10 or 15 airports right now that aren't
Mr. Neil Raynor: I can think of 10, 15, 20
airports that aren't viable, and sometimes the
communities have got to take a wider view of what the
airports... On a purely operating basis, those airports
may not be viable, but on the bigger picture issues of
what that means to the community...I've left
a document on the economic impact of Canadian
airports with you, and I would encourage you to look at
You can look at the bigger picture in terms of what
economic advantages they bring to a region, what jobs
they generate on the airport, off the airport,
taxation—municipal, provincial, and federal
taxation—that is generated by the airports being
there. Sometimes in those small communities, the communities
take the view that the benefits, the wide,
bigger-picture benefits, would justify perhaps an
Mr. Bill Casey: So in a smaller community that
isn't viable, perhaps there is a way to make them
viable, or the
community has to decide, even though it's the
minister's own standard that regional service must be
maintained. Then they're imposing on the community that
they must maintain them.
Is this what you see as the only way
they can continue to operate?
Mr. Murray Sigler: First of all, in Canada today,
if you look at the smaller airports across the country,
there's quite a variety of ownership. Some are still
owned and operated by Transport Canada. In some
communities some are owned and operated by provincial
governments and some are in the hands of
municipalities. So when they look at the financial
aspects of that, equating that to who's the owner and
operator of the airport I think is an important piece
of it. I think at a local level they could try
to cover off the operating expenses through landing fees,
user fees of some kind, but there has to be help on the
capital side. That is what it boils down to.
Mr. Bill Casey: You can't apply the same
principles for a high-traffic airport to a low-traffic
airport, because they don't have the opportunities to
do the economic development within the airport as
Calgary and Vancouver would. So there has to be a different
formula for regional airports, the smaller airports.
What is the break-even point, or when do airports seem
to break even in terms of movements a year. How many?
Is it 100,000 or is it less than that?
Mr. Neil Raynor: It's normally in terms of
passenger throughput, and then you have airports that
are really cargo airports on a whole different level.
We generally see that about 800,000 to one million
passengers tend to make the difference. But within
that there's no hard and fast rule. I can think of a
B.C. airport of about 800,000 that is hugely
successful because of its position, but others that are
larger airports in Canada are marginal. So to go back
to a point that both Mr. Hopkins and Mr. Sigler have
made, you have to do this on a site-by-site basis.
Mr. Bill Casey: Mr. Sigler referred to some
airports that had not been divested. There are
some that have not been divested. Are they being
treated differently now from the ones that have been
divested by Transport Canada?
Mr. Murray Sigler: No. I think in terms of the
regulatory function and safety, the technical side,
it's applied fairly and consistently across the board in
terms of looking to user fees. The federal government
has put in big increases in landing fees and terminal
charges, I think, at the airports it continues to
Mr. Neil Raynor: The problem is they've
grown faster in fact at the federal-controlled airports
rather than the airport authority-controlled airports.
Mr. Murray Sigler: Their fiscal approach is
similar as well.
The Chair: Thanks, Mr. Casey.
Mr. Fontana, please.
Mr. Joe Fontana (London North Centre, Lib.): Thank
you, Mr. Chairman.
I think you've said it best.
Obviously the policy that was put in place some time
ago is the right policy. Obviously we're all
going through a learning process. A government that
used to have to pay $150 million to look after all
airports now is making, I suppose, a little more.
Before it was Vancouver, Pearson, and I believe
Calgary that were paying the freight for the whole
country, and now it's gone to a user-based system.
Perhaps there is an opportunity for us to look at
airports some time in the future, because we are going
through it and I know the Airports Council is
trying their best too.
But I'm getting a little ticked, because part
of accountability is that when the heat starts to be
applied, you have to start taking a little bit of that
responsibility and not try to pass it on and say “Oh, by
the way...”. I'll tell you, the heat is coming, and
we've heard it. ATAC is not very happy with you. I
have consumers who are saying you're building
mausoleums. For the price of tickets at the end of
the day they're blaming the airlines, they're blaming
the airport authorities, they're blaming the federal
government for taxes, and they're blaming the municipal
government. At the end of the day—and Ovid said it
right—let's get back to what the purpose of this is
all about, which is looking at the consumer, the person
who has to pay the freight. They don't know in that
ticket where that money is going, but that should be
We have to drive down those costs for the
consumer. We all have a part to play in
it—the federal government, the airport authorities, you name
it. I think we have to get those prices down
because Canadians are getting a little peeved. I think
we can work together on this.
Let me deal with what's at hand here. If in fact in
restructuring, and I think you pointed it out, there's
one dominant carrier, which essentially means they
will have an awful lot of clout at airports—regional
airports, small airports, big airports. They're going
to be very big and powerful. In fact they may
start to drive the agenda as opposed to the other way
around, where you have a good competitive climate. We
know we have competition. We want to grow competition
by the independence of the regionals. But if in fact
you have a dominant carrier, what's going to happen to
your revenue base at some of your airports,
which will cause some of them to perhaps
become even much more financially at risk? What's going to
happen to competition and your cost? At the end
of the day one dominant monopoly—and this is what we've
heard—in terms of competition, in terms of the
consumer, the public interest, is going to have a
heck of an impact on your airports, because you
might very much drive the costs and start dictating
what they're going to pay for landing fees, what
they're going to be paying for concessions at your
I'm wondering if you can give us an idea of
how you think we ought to approach it. What do you
think we need to do in order to spur competition? We
want to grow competition. If there's going to be a
dominant air carrier, that bodes ill for you, because
in the absence of competition you're going to suffer
some big-time problems. So what do you think you can do
to help the puzzle so that we can grow competition in
terms of your cost in this new restructuring we have to look
Mr. Murray Sigler: In
the longer term, if it's a competitive structure the
economy should drive the degree of air service. There
should be some direct correlation. What we're worried
about in the short term is that a super-dominant
position of one carrier, which picks up control of all
the airports, will thwart the competitive environment
from working, and those objectives are the right
objectives to be considering.
In the U.S. this issue has been a big one for a number
of years because in the U.S. there tends to be one
airline that basically owns a hub city. They don't
have three or four airlines sharing one. One airline is
dominant at Dallas-Fort Worth; another one is dominant
at Denver. So they've had to look at what the rules are
in terms of ensuring the capital programs at
airports are fair to all carriers, not just preserving
and entrenching the dominant carrier position, and
that's where these majority and interest clauses come
The airlines have to be involved in the capital
programs at any airport, but what percentage vote of
the airline should be allowed to tell the airport
authority to go ahead with the program? The sixty-six
and two-third percent kind of vote certainly allows a
dominant carrier to block any other carrier getting
access. So that's one aspect of it.
Then there's the access to those facilities once
they're built and in place. How do we sort out the
access to the infrastructure? That's where you need
the rules on the gate allocation. You need a fair,
neutral, and pro-competitive entity that deals with any disputes
that arise between the airlines that they can't
That's why I say in Canada I think we're fortunate to
have the airport authority model in place to do that
sorting out, because the airport authorities, as Mr.
Raynor said at the start, are very much an agent for
competition, because they're also agents for economic
growth in their communities.
Mr. Joe Fontana: Just to pick up—
The Chair: Very quickly, Mr. Fontana.
Mr. Joe Fontana: Yes. To pick on Bill Casey, in
any scenario you're going to have winners and losers,
and perhaps in the airports and communities. At
the end of the day I think our committee wants to
make sure there is service to the communities
and that there is regional competition, because in fact not
only the airports but the very viability of communities
are dependent on that.
In the event that we have to construct a new
competitive policy to make sure we have domestic
competition within a dominant carrier, what in fact
should we be doing with regard to the costs at
airports? We have to find a way of reducing your
costs, or you reducing the costs, so that regional
carriers can develop. Domestic new entrants may want
to develop and be much more competitive, and obviously
we've heard from ATAC that some of your costs—I don't
care who is responsible—at the end of the day are too
Mr. Murray Sigler: We agree with that.
Mr. Neil Raynor: We agree with that, and the
largest single cost to the airport authorities is the
The second point—
Mr. Joe Fontana: Yes, but you negotiated it in good
faith, and then you want to renegotiate.
The Chair: Let's not get into a debate.
Mr. Neil Raynor: We accept that entirely, but
that is the answer to the question. The single
important thing you could do is to ensure access,
because with access you will get competition, and that
means you will get the best prices for the
communities that these individual airports serve.
The Chair: Thanks, Mr. Raynor.
Colleagues, we have two questioners left, Mr. Bailey
and Mr. Hubbard, and then we'll have to move on to our
Mr. Roy Bailey (Souris—Moose Mountain, Ref.):
Thank you, Mr. Chairman.
We were a little late getting here. Over half of this
committee were at breakfast with the Air Transport
Association of Canada, and, as you would be aware, we
heard their story about their costs. It's a chicken
and egg thing. It keeps going round and round.
Some of the things they said were outstanding in terms
of how their operating costs have risen. You say the
rent isn't fair and they say their costs are too
high, and then the ticket agent and the people who we
represent, the travelling public, say it is too high.
And we're going around in a circle.
I must congratulate you, however, for a statement you
made. It was a very positive statement, because you said
that in terms of this realignment, whatever takes
place in the future with the airline you would be
cooperative. I've no reason to doubt what you've said
is true, but it is of utmost importance, because
without a very cooperative attitude from the airport
authorities this whole thing could drag on for a long
time and we could really get hurt with the travelling
public in Canada. So I hope you will remain true to
I want to get back to the leasing. Your leasing is
with the federal government, and as I understand it,
that leasing is a huge document. On what conditions
could that leasing be broken by either yourself or the
Mr. Murray Sigler: I don't know if there's a short
answer to that question because it is such a long
Mr. Roy Bailey: Then give just a short one. There are
Mr. Murray Sigler: Financial defaults and going
offside the national airports policy basically.
Mr. Roy Bailey: Would you gentlemen agree with me
that in terms of your PR with the community you serve
now—if you serve a small city like the area I'm from—this
authority has not done a very good job of letting
the public understand what this new airport authority
is all about? There seems to be a lot of confusion out
there. And whether it be the chambers of commerce or
yourself, or the city or whatever, I think if you're
under review at the present time, may I suggest to you
that this is, first and foremost, one of the things you
have to do.
Mr. Neil Raynor: I think it's a very good point,
and it's well noted, yes, sir. Thank you.
Mr. Murray Sigler: I think that's essential for
the airport authority. It has to have community
support. That's the whole basis of it. But as part of
the review, there are outstanding levels of community
support for the airport authorities all across this
country. So the review did in fact confirm there is
strong community support for the airport authorities.
Mr. Neil Raynor: Perhaps I could ask Mr.
Hopkins, as a chair of one of those authorities,
in this particular case in Winnipeg, if he
has a couple of comments on this issue as well.
Mr. J.A. Hopkins: Thank you for that.
Speaking to the Winnipeg example, I can assure this
group, and you can easily verify these comments, that we
have an outstanding relationship with our community,
with the nominating entities in the community, with the
travelling public, and with the general public. We do that
because we're a very open organization.
Let me give you a practical, tangible example of
accountability in Winnipeg, and this likely applies in
other communities as well. A short while ago we
launched a long-term strategic planning process. It
took us nearly a year to put that together. The reason
it took us this long is that we included virtually
every type of stakeholder group you could imagine, and
some that perhaps you wouldn't, in our deliberations. We
met with all of our major customers, we met with the
air carriers, we met with our tenants, and we met the
public. We have a community consultative committee
that represents virtually every aspect of our
community. We did presentations to them and had inputs
from them. We received inputs from chambers of
commerce and other types of organizations that have a
keen interest in the financial viability and economic
development in the community. We took all of that
information and distilled it into a strategic plan.
One of the outcomes of that strategic plan is the need
to redo our airport master plan, which we're in the
process of doing now. We were following the same type
of open public process that encourages consultation
from virtually every corner of the community and every
organization in that community that has an interest in
the airport. I would tell you without hesitation that the
process we have followed in those two examples, and in
many others I could provide to you, far exceeds
anything any air carrier in this country is doing, and
in fact exceeds anything any crown corporation in this
country is doing. So we have gone far beyond the
accountability principles the federal government
included in our lease and in our bylaw to ensure there
is community input on an ongoing basis to the airport
The Chair: Thanks, Mr. Bailey.
Mr. Hubbard, please.
Mr. Charles Hubbard (Miramichi, Lib.): Mr. Chair,
we seem to have spent most of our time talking about
the NAS airports.
In your submission you say your
council represents local, regional, and national
airports, and I think, Mr. Chair, we should look for a
few comments from our witnesses here in terms of how
they perceive the local and regional airports that are
outside this 26-airport system. We've heard, and I
know, that some of the 26 complain about their
future. I think the NAS must address and be concerned
with some of the airports. Some have not already been
divested; others complain their future doesn't
look that bright. In terms of what we might hear from
your appearance this morning, would you make some
comments on local and regional airports and how they
perceive the future of their existence in terms of
what's happening to the airline industry?
Mr. Neil Raynor: If I can make some general
comments, I'll then run again through three points
we make in the report about smaller airports.
First of all, I will state that we, the CAC, the Canadian
Airports Council, represent those airports that I
mentioned at the beginning, and they're of all sizes.
One of our most active committees is what we call the
level two airports, the smaller airports, committee.
It's a very active, very vocal organization.
I have to tell you that the majority of my time
running the national office is spent on small airport
issues. The reason for that is because they're the
ones that need the help. The Winnipegs of this world
have the resources, quite frankly, to do that for
themselves. The small airports can't afford that sort
It's an issue we're working very closely on with
ATAC. I wish to say, by the way, that we are
working on a number of issues very closely with the Air
Transport Association of Canada, and I think we are
getting great benefits from doing that. One of the
issues we're working on right now is in terms of the
ERS, the emergency response service, that is being
considered for the very smallest airports. It was
removed four or five years ago as Transport Canada was
transferring these airports to local government. There
is now a proposal on the table from the federal
government to reintroduce it, with a huge cost burden.
That cost burden flows through the airport and flows back
to the airlines and the consumer at the end of the day.
So we're working very closely with the communities,
with the small airports, and with the airlines too, to
address many of those issues.
Again, to reiterate, I spend easily 75% of my time on
those sorts of issues. What we said, and this has come
directly from the smaller issues, these comments, is
that they believe something has to be put in place to ensure
that essential service is maintained, is guaranteed, to
communities served by carriers today. Whatever
structure appears from this current restructuring
process, they are very keen that whatever regulation
may be put in place—and we've made an argument against
regulation or reregulation—if regulation is
established, then it must not create a monopoly that
would stop competing airlines going into those smaller
The last one was the one about the capital program to
assist those smaller airports and ensure that they have a
Mr. Murray Sigler: All the small airports are
concerned about their financial viability today,
particularly on capital items, such as we talked about
earlier. So before any restructuring, they had
concerns, and they are even more concerned today. I
can pass that on.
I've heard from some of them that there is a
concern that when they hear the commitment that their services will
be maintained, and must be maintained, they wonder who's going to
pay the bill for that. There's a concern about that,
about what is the price tag of maintaining the service.
I'm sure the airlines are concerned about it. I'm sure
the airports are also concerned about who's going to
pay the bill for that. When you equate that to
the smaller airports, they don't have a lot of depth of
resources on a stand-alone basis. In many cases,
even in the municipality it operates in...it's
municipal and it doesn't have money to shift into
maintaining that. So it is a legitimate concern,
and it varies a lot from city to city.
Mr. Charles Hubbard: With the issues of safety and
visibility that are coming to the table now, is your
group very much aware of this, and will you be making
representation on behalf of the smaller airports in
terms of addressing those two issues?
Mr. Murray Sigler: On the whole, we are. We're
involved jointly with the air transport industry.
In terms of the point you mentioned earlier in the
question about ATAC, the one thing the airports haven't
done a good job on as an industry is communicating with
the airlines as an industry and working together. I
agree totally, and we're trying to fix that up. That
equates itself to the smaller airport, the technical
side of it.
We're also partners with Transport
Canada in that.
We wouldn't want you to leave here today thinking
there's an adversarial relationship between the
airports and Transport Canada, because there very much
is not. They're always responsive to our input, and
we're talking about these issues with the senior policy
people at Transport Canada.
So it's not an adversarial process, and I wouldn't
want to leave you with that impression. We're all
trying to find solutions to these issues.
The Chair: Thank you very much, Mr. Hubbard.
Gentlemen, you've been asked, or may still be asked,
by some of our colleagues for information pertaining to
any related subject. Perhaps you could pass that
information along to the clerk so that the clerk can
distribute that information to all members of our
We now have to move along to our next witness.
Mr. Raynor, Mr. Hopkins, and Mr. Sigler, thank you
very much for your presentation and for answering our
questions this morning.
Colleagues, we will suspend for five minutes.
The Chair: Order, colleagues.
I would ask the photographers to put down their
Our next witness this morning, colleagues, is Regional
Airlines Holdings Inc. Joining us is the president and
CEO, Mr. Robert J. Deluce; the executive
vice-president, André Lizotte; and a director
with Newcourt Capital, Mr. Gordon Thompson.
Gentlemen, welcome to the Standing Committee on
Transport. We look forward to your presentation of
between 10 and 12 minutes. Then we'll have
questioning from my colleagues.
Please proceed whenever you're comfortable, Mr.
Mr. Robert J. Deluce (President and CEO, Regional
Airlines Holdings Inc.): Thank you.
Good morning, ladies and
gentlemen. My name is Robert Deluce, and I'm the
president and chief executive officer of Regional Airlines
Holdings Inc. On behalf of my associates, I'd like to
thank the committee for inviting us to appear before
you to share our vision of the future of Canada's
airline industry. With me here today is André Lizotte, executive
vice-president of Regional Airlines Holdings Inc., and
Gordon Thompson, a director with Newcourt Capital.
Ours is an industry undergoing unprecedented change.
What the outcome will be is still unclear. However, it
is our assumption that in the near future we could see
a single national carrier emerge, one that would be
focused primarily on long-haul domestic and
It is in the context of this unfolding situation that
we are today outlining our vision to you, one that we
believe presents a realistic, commercially viable
proposal that would have a positive, pro-competitive
impact on the marketplace. It is also important to
note that we are prepared to move forward quickly
should a single national carrier be the result of the
current restructuring process and should the government
consent to impose certain conditions upon that single
Our proposal envisages the formation of a
Canadian-owned, regionally focused, independent airline
dedicated to serving Canada's small market communities
and providing competitive choices to Canadian
travellers. It is a proposal that would not only
preserve but also improve on the service to Canada's
regions by providing Canadian business and leisure
travellers with more choice and convenient, reliable
service to domestic, transborder, and international
Regional Airline Holdings Inc., a newly formed
corporation, would acquire, finance, restructure,
manage, and expand the operations of the regional
airline subsidiaries of Air Canada, made up of Air
Ontario, Air Nova, and Air B.C., and of Canadian
Airlines, comprised of Canadian Regional Airlines.
It is an option we believe would fit well within the
federal government's policy framework. It is based on
a financially sound business model. And it is an
option that, given the optimal regulatory environment,
we are confident will not only succeed but will also
have a favourable impact on all stakeholders, including
consumers, regional communities, and the employees of
the regional airlines.
The business model we have created is based on
the expansion of regional service, and because of this
anticipated growth, we do not expect any job losses. In
fact, employees will have more career opportunities in
this expanding airline, particularly because of our
intention to introduce more modern technology aircraft,
including regional jets.
However, before I expand on the details, I feel I
should tell you a bit more about who we are. My family
and I have been in the regional airline business for
almost half a century, in my case for almost 32
years. My own career began in the late 1960s working
for my father's airline flying in and out of remote
hunting and fishing locations in northern Ontario.
We have owned and operated a number of regional
airlines throughout Ontario, Manitoba, and Quebec,
including Air Ontario, Air Alliance, Air Manitoba,
Great Lakes Airlines, Air Creebec, Superior Airlines,
Austin Airways, and White River Air Services.
I also had part ownership in and served as president
of Canada 3000 Airlines, one of Canada's leading
Mr. André Lizotte (Executive Vice-President, Regional Airlines
Holdings Inc.): My name is André Lizotte and I'm one of the
operators of the oldest air carrier in Canada. I'm the founder of
Pro-Can Aviation and was formerly the President and CEO of Nordair
Ltd and Québécair, as well as a board member and chairman of the
Audit Committee for Air Alliance. From 1989 to 1992, I also served
on the Federal Ministerial Aviation Task Force.
Mr. Robert Deluce: On Gord's side, Newcourt
Capital is a recognized world leader in regional
aerospace financing, having provided over $14 billion
U.S. in regional aircraft finance solutions. Newcourt
Capital is part of the CIT Group, the world's largest
publicly traded, commercial finance company, with more
than $93 billion in assets.
Based on our many years of experience, both André and
I fully understand the importance of air travel to
Canadians who live in our smaller cities and towns. We
understand that they, as much as those who live in
Montreal, Toronto, or Vancouver, rely on air travel to
conduct business, to take holidays, to attend school,
or simply to visit family and friends.
We do not suggest that Canada's smaller cities and
towns are not already well served by air, nor do we
suggest such service to the regions will diminish once
a single national carrier emerges.
What we want to make clear is that we have the
expertise, experience, and understanding to provide and
grow these services better and more efficiently while
at the same time allowing the emergent national carrier
to focus on what it does best.
So while they concentrate on providing service to
London, England, our plan will be to serve London,
Ontario; Saskatoon as opposed to Sao Paulo; Timmins—my
home town for almost 14 years—rather than Tokyo,
By creating under independent ownership a
competitive network of regional connectors, the new
airline, which I will refer to in future as Regco,
would offer a competitive service on regional routes as
well as interlining and feeder services to the emergent
It would be narrowly focused, concentrating its
expertise and experience on the regional services it
understands so well.
It would be flexible in its code-sharing arrangements
with both the national carrier and other domestic
carriers wherever feasible. So, for example, a tour
operator might be able to offer a complete travel
package from Sudbury to Barbados instead of having to
base its fares and services on arriving and departing
from major centres such as Toronto.
It would concentrate its services on lower density
markets and short-haul routes that are unattractive to
major airlines and low-cost carriers operating larger-capacity
jets. At the same time it would provide
feeder service into the hubs of code-sharing partners.
It would provide employees with the best training
possible, greater decision-making responsibility, and a
financial stake in the overall performance of the
In order to grow it would seek to identify new market
opportunities in terms of new routes and alliances and
develop and integrate these new routes and alliances
into our existing operations. Most importantly, it
would seek to continually improve the services
available to consumers in a growing number of
communities across Canada.
Mr. André Lizotte: Structurally, the new carrier would serve
Canadians right across our vast country. It would employ
approximately 5,000 airline professionals and operate a combined
fleet of more than 125 aircraft ranging in size from 19 to 70
It would consist of two divisions: one situated in Eastern
Canada and the other in Western Canada, with route networks built
around point-to-point, high frequency services connecting major
urban centres, small market communities and a variety of
destinations between Canada and the United States.
Regco would also operate in both the Western Canada
triangle—comprised of Calgary-Edmonton-Vancouver—and the Eastern
Canada triangle—made up of Toronto-Ottawa-Montreal - and would
develop new service patterns within each region: Calgary-Regina-
Winnipeg, for example. Maximizing the utilization of our resources
will be achieved through the rapid turnaround of aircraft, optimal
route configuration—including the expansion of transborder
operations - and by enabling employees to handle multiple roles.
Mr. Robert Deluce: We believe our proposal is
financially sound and commercially viable, and can, given
the right conditions, succeed. Clearly, however,
achieving commercial viability and the pro-competitive
market impact that our proposal offers will depend upon
the appropriate regulatory environment being in place.
It is critical that the matters I will outline
for you form part of the conditions of approval
incorporated by the Ministry of Transport into any
recommendation to the governor in council and be
enforceable in the event of a single national carrier.
Voluntary commitments or non-enforceable undertakings
will not be sufficient to overcome the financial risk
associated with a potential non-recourse breach by a
Mr. Gordon Thompson (Director, Newcourt Capital,
Regional Airlines Holdings Inc.): Regional believes
the following conditions, each of which must be
agreed to prior to the approval of any single national
carrier scenario, will facilitate our competitive entry
into the marketplace while safeguarding the interest of
Canada's travelling public.
First, the emergent national carrier must divest itself
of its regional feeder airlines and be prohibited from
re-entering this sector of the market for a period of
Secondly, the emergent national carrier must also be
required to interline and code-share with Regco for
feeder traffic exclusively.
Thirdly, the scope clause provisions of the Air Canada
labour agreements must be removed if regional carriers
are to expand and grow their businesses. This would
allow regional carriers to utilize modern technology
aircraft, including regional jets.
Fourth, Regco must be allowed to enter into additional
code-sharing commercial agreements with other carriers,
both domestic and international, at cities in both
Canada and the U.S.
Regco must have access to a sufficient number of slots
in close proximity to the dominant carrier and other
major airlines, and other airport facilities, such as
counter space, baggage handling facilities, etc. Regco
must also be allocated a sufficient number of slots and
gates at major airports in Canada and at New York's La
Guardia and Chicago's O'Hare airports during the prime time
travel periods each day.
Sixth, as well, there must be a level playing field for
Regco in dealing with travel agents and other
distribution channels and no bias in computer
reservation systems or discriminatory commission
Lastly, any consent order allowing the creation of a
single national carrier to proceed should include the
condition that failure by the emergent carrier to abide
by any one of the necessary conditions for
divestiture would be subject to sanctions.
Mr. Robert Deluce: The airline business is a
good business. Having been involved in this industry
for my entire adult life, I believe that with the
appropriate conditions in place, there is an exciting
opportunity ahead of us.
The proposal we have put forward today is
intended to encourage further dialogue on the future of
Canada's rapidly changing airline industry, while
specifically addressing the needs of regional
consumers. We believe our proposal speaks directly to
the five fundamental principles set out by the
transport minister and that it offers the best chance
of achieving the government's vision of a safe and
healthy airline industry capable of competing with the
biggest and best airlines in the world while serving
all parts of the country at fair prices and controlled
by Canadians for Canadians.
The experience of our management team, built upon a
solid track record of owning, financing, and operating
regionally focused airlines, combined with a
pro-competitive policy framework as set out by the
federal government, will allow us to offer a
commercially viable alternative to the major
established carrier in Canada.
small-market communities would have greater choice and
more service options when travelling either
domestically or internationally through feeder service
provided by Regco to the emergent national carrier
We hope to work closely with the federal government,
the national and regional carriers, and employees and their
unions to establish the optimal environment for
realizing our vision of a stand-alone airline. With
limited government involvement at the outset in setting
the rules, this private sector, Canadian-owned solution
would provide important benefits to all stakeholders
across the country, including consumers, regional
communities, and the employees of regional airlines.
Thank you very much.
The Chair: Gentlemen, thank you for your very
frank and straightforward presentation to the committee
this morning. I am looking forward to the questioning.
Ms. Meredith, please.
Ms. Val Meredith: Thank you, Mr. Chair, and thank
you, Mr. Deluce, for giving us an interesting thing to
consider in the restructuring of Canada's airline
I'm going to ask you a couple of questions, but the
first one is this. Is there not a parallel between what
you're trying to do and what Canadian Airlines
International did, and what makes you think you'll be
any more successful than they were in competing against
a dominant air carrier, a dominant national carrier?
Mr. Robert Deluce: If I can answer that, the Regco
proposal is a regionally focused concept, and our
vision basically is that in the event
that a dominant carrier emerges, we would basically put
together the various regional airlines
that are involved in Air Canada and
Canadian Regional into one carrier, regionally
focused and concentrating on the markets
that others aren't really likely to be
We think that basic concept will bring
a lot of benefits to the regional communities that are
They'll end up with improved and better service.
They'll probably have improved opportunities. Because our
business plan contemplates the introduction of newer,
more modern technology aircraft, including regional
jets, that would be an improvement. There's bound to
be a strong economic impact on some of the communities
that are involved, and I think there's a distinct
difference between what Canadian has tried to do and
what we are proposing to do. We will be regionally
Without going on too
long on that question, I think the other thing is that
our concentration, as I mentioned earlier, will be on
London, Ontario, instead of London, England, and
Saskatoon instead of Singapore. So it will make a
Ms. Val Meredith: The other issue you raised
in your presentation that I think needs to be addressed
is one of your conditions, and that was condition number
Mr. Thompson brought up. That's that the emergent
national carrier must also be required to interline and
code-share with Regco for feeder traffic exclusively. I
noticed in the number of regional airlines you're talking
about bringing in, there are
some that are missing that are in existence now.
When you start talking about an exclusive arrangement,
are you suggesting you would have a monopoly on
regional feeder into the dominant carrier, leaving out
InterCanadian, First Air, and some of these others that
you don't seem to be interested in acquiring control
Mr. Robert Deluce: Let me talk first about First
Air and maybe Canadian North, because they sort of fall
into one category, and we don't see our business model
impacting on either of those airlines. Whatever
they're doing today they should be allowed to continue
doing with the dominant carrier, and they can have
code-sharing arrangements with that dominant carrier,
or they can have arrangements with us, or a combination
of those two things. That shouldn't impact on
either of those carriers.
With regard to InterCanadian, we see the
Regco solution as potentially encompassing
InterCanadian. I think there's room for InterCanadian
within that solution.
Frankly, we've had discussions with
individuals at InterCanadian, and although nothing
definitive has come out of that, we think there are
options both of us want to explore in that regard. So
there's a way of making the InterCanadian thing work as
Ms. Val Meredith: Then how do I define
exclusively? You seem to be indicating to me that
Canadian North and First Air could operate the way they
are now, which means they would have co-chairing and
interlining. If InterCanadian would be exclusive, that
doesn't seem to very exclusive.
Mr. Robert Deluce: It would be exclusive with
respect to the routes the regional carriers are
presently flying and are presently feeding to the
dominant carrier. There needs to be this transitional
business commitment on the part of the dominant
carrier, with the regional carrier, and the network we
hope we will be able to acquire and expand.
If you look at Canada generally, the most lucrative
markets, domestically and internationally, have not
been able to sustain two principal mainline carriers.
If you look at the regional markets, they're even more
fragile. So it's almost inconceivable to think there
could be more than one carrier in some of these
regional markets. Some form of transitional business
commitment on the part of the dominant carrier, with
this newly set group of connectors or regional
airlines, is essential.
The Chair: Thank you, Val.
Mr. Joe Fontana: Thank you. Let me welcome a
fellow Timmins knight and Londoner back to Ottawa.
It's nice to see you, Mr. Deluce, Mr. Lizotte, and Mr.
In the perceived crisis we are looking at today,
certain opportunities sometimes evolve if you have a
dynamic private sector solution. This may very well be
an opportunity this committee has at this time, if
we're looking at restructuring our airline industry and
the dominant carrier should evolve.
There are all kinds of scenarios, and I
think you've pointed them out. Even the Competition
Bureau has talked about them. What happens if there's
only one dominant air carrier? People have said it
would be a monopoly that could have a stranglehold on
pricing and service, especially to regional
communities—small towns that very much depend on
I know you talked a little bit about the five
principles. While you didn't outline what the
minister's principles are, they seek to define what
that public interest is and what we're trying to do
here. You've defined that it will be Canadian owned,
operated, and so on, the employees will be taken care
of, and regional communities will be looked after.
Maybe we could get into that a little more—that there
will be a regime where the consumer is essentially
I would like you to expand on that. What will this
mean to the consumer? Obviously that's where we're
coming from. Canadians are very ticked off about the
prices they have to pay for flights and service.
Obviously with a dominant air carrier all kinds of
scenarios loom possible, such as prices that might go
through the roof when a monopoly exists, and in fact service
may be confined to certain areas.
I would like to ask you to tell the consumers of this
country what that means to them. I think you've
addressed service, but I want to know a little about
pricing. You're asking for an awful lot of guarantees
from the Government of Canada in order for you to
become viable. What will that really mean to
Secondly, you've come forward with this proposal, but
because you've been in the airline business for such a
long time, what do you think about the dominant air
carrier scenario that has evolved?
Do you believe that a dominant air carrier controlling
the regionals, putting in place another discount
airline in this country, and controlling essentially
all the slots at the airports by virtue of their pure
dominance in the market is good for Canada? Should we
be left with this scenario of one dominant air carrier
controlling the regionals, making a discount
airline—essentially controlling all aspects of travel
in this country?
Maybe you could start with that and talk a little
about what the consumers of this country can look
Mr. Robert Deluce: Mr. Fontana, do you want me
to start with that last question, then?
Mr. Joe Fontana: If you like.
Mr. Robert Deluce: I think it's pretty
inappropriate for us to comment on the Air Canada
proposal; it has to be judged on its own merit or
Our vision is that if there is a dominant carrier, we
will acquire, finance, restructure, manage, and expand a
regional airline network made up of the various
airlines I described, right from Air Nova to Air B.C.,
Canadian Regional and Air Ontario.
Looking at that and considering the fact that our
entire business plan is based on service to small
communities and regions, you can expect improved and
expanded service to those regions out of that.
The other thing you have to look at is the fact that
our focus will be just on the regions and smaller
market communities. We won't be thinking of
international routes. Our focus will be regional and
not international. That will have to have a positive
impact on the communities involved.
The other thing I want to put across is the fact that
to a large extent, because of the very restrictive
scope clauses that exist today in some of the
collective agreements, the regionals have almost
been in a cage. They haven't been able to introduce the
newer high-technology equipment you would find south of
the border in similar marketplaces. We want to
introduce those aircraft, and our business plan very
much contemplates being able to do that.
Mr. Joe Fontana: What about the consumer and prices?
Mr. Robert Deluce: The consumer will also be a
beneficiary of this. When you put together a
collection of airlines of this sort, you generally get
some efficiencies of scale or size that relate to a lot
of the overhead and other things of that nature. We
would expect those efficiencies to translate into
better fares, quite frankly.
Mr. Joe Fontana: In the absence of your proposal,
the only proposal on the table is for one dominant air
carrier that would control the regionals—therefore a
perceived lack of competition. Do you think that's
Mr. Robert Deluce: It's probably inappropriate for
me to comment on Air Canada's proposal. All I know is
that what we're proposing—
Mr. Joe Fontana: Apart from Air Canada, in terms
of making a public policy, do you think it is healthy
policy to have one dominant air carrier that controls
the skies regionally, nationally, and internationally?
What do you think? You've been in the air business.
Could you survive? Could you start a new airline in
that scenario, without having to buy the regionals?
Mr. Robert Deluce: Our proposal is based on there
being a dominant carrier. I guess you have to bear in
mind—and I think what we're asking for here—that the
dominant carrier must be required to divest itself of
those regional carriers. That's the number one
essential thing on our list.
The second thing is that any policy framework you put
in place must allow for the expansion and improvement
of this newly formed regional carrier on a basis that
will remain commercially viable. Mr. Thompson outlined
some of the conditions that would make such an
enterprise viable. I think those are important
The Chair: Thank you, Mr. Deluce.
Mr. Guimond please.
Mr. Michel Guimond: Mr. Deluce and Mr. Lizotte, as you pointed
out in your brief, you have considerable experience in the regional
airline business. We can appreciate that. No one could deny your
You know as well as I do that when it comes to regional
airline service, people living in the regions basically want three
things: reasonable air fares, frequent service and quality service
provided by certain types of aircraft. Your brief makes very little
mention of these concerns. What is your position on air fares? When
we began our study, we heard from one party who wanted to make an
offer to acquire Air Canada. This offer was subsequently ruled
illegal by Quebec's Superior Court. That particular owner had
suggested that fares be frozen for a period of five years. The
feeling, however, is that air fares are already pretty high. It's
one thing to freeze fares that are affordable and reasonable, but
freezing air fares that are already unreasonable doesn't make them
acceptable for all that.
In terms of formulating public policy, what should our
committee be considering in the way of commitments to regional
Mr. André Lizotte: If I may say so, you've highlighted three
very important considerations: air fares, frequency and quality of
service. Our organization's focus is regional service and, in
accordance with the business plan drawn up with the regions, we try
to provide service geared to their needs. Air fares are not are
sole consideration, although we realize that something truly needs
to be done on that front. We believe in the importance of working
closely together with other stakeholders, be they members of boards
of directors, senior officials, employees or unions. We constantly
strive to work together with the regions.
As you know, fares are naturally a function of the frequency
of flights and passenger volume. Consider the example of the
Saguenay—Lac-Saint-Jean region. If we have to operate six flights
per day to meet the demand, then we will do so. Our goal is to
support regional economic development. It can be a matter of
providing service or offering special deals on air fares.
Mr. Michel Guimond: I don't wish to argue, Mr. Lizotte, but
after all, yours is not a philanthropic or charitable organization.
You have to admit that profitability is your bottom line. Don't
tell us that your sole objective is to help the regions.
As far as the type of aircraft used, it's the old chicken and
egg question. Are passengers interested in taking a flight on a
Beechcraft if other options are available to them? When I met in
Quebec City with Joe Randall, the President of Air Nova, I
discussed with him the fact that he had held on to some Beechcraft
planes painted in the Air Alliance colours. I told him that I made
26 round trips between Quebec City and Ottawa every year and that
given the choice, I would probably prefer to fly on an Inter-
Canadian ATR-42 than on an Air Alliance 19-seat Beechcraft, where
no in-flight service was available and where the co-pilot did
double duty as the flight attendant. He would almost need three or
four hands to take care of everything. It's also a question of
supply. When Québécair offered flights on BAC-111s... What are we
supposed to think of your proposal? What are we to believe? Do you
have a magic wand that you plan to wave and revolutionize the
industry in the process?
Mr. André Lizotte: Earlier, Mr. Deluce stated that our
corporation needed some financing in order to standardize our fleet
of aircraft. This is very important. An airline's economic
situation is tied to fleet operating costs. It's a very costly
proposition to operate a fleet consisting of a variety of aircraft.
You mentioned Beechcraft. However, it is not up to me to
comment on the fleet operated by other airlines. In order to
improve service to the regions and reduce our costs, we plan to
standardize our fleet of aircraft. This is something that we need
to do to ensure adequate regional service. We plan to introduce a
type of aircraft that will meet the needs of regional residents.
I'm not here to pass judgement on the Beech 1900D, the ATR or
the Dash 8. I'm here to share with you our proposal to form a
corporation with a regional focus. Our mission, in all honesty, is
to help the residents of the regions, whether they live in Abitibi,
Rimouski, Quebec City or the Saguenay. We want to help them and
work with them.
Of course, if we had an aircraft that we could operate at a
reasonable cost in the regions, then we could meet the needs of the
residents. How many seats would this aircraft need to have? How
often would flights be scheduled? I can't talk to you about these
considerations today, but we do plan to provide a service to meet
the needs of regions across Canada.
The Chair: Thanks very much, Mr. Guimond.
Mr. Comuzzi, please.
Mr. Joe Comuzzi: Good morning, gentlemen.
There are some famous people coming out of Timmins
these days, Mr. Chairman.
Are you folks resigned to the fact that as of this
moment we're resigned to a single dominant carrier? Is
that the only alternative that's available to the
Mr. Robert Deluce: Well, in answer to that
question, certainly our vision is based on there being
a single dominant carrier. We think the situation is
headed that way. I think that to a large extent,
rightfully or wrongfully, Canadians are prepared for
that to happen. They might not have been five or so
years ago, but I think they are psychologically
prepared for there to be one dominant carrier. The
two-carrier policy does not appear to have worked. Our
vision basically is to set up this airline based on
that single dominant carrier proposal.
We know our proposal is well financed; it's been well
thought through. It's a credible group that we've put
together. The individuals who make up our team, besides
myself—and I've had about 32 years in the business and
have been flying since about 16 years of age, or at least licensed
at 17—include Newcourt Capital,
who are very well recognized as a strong
player in terms of financing regional aircraft. The
second individual, of course, is André Lizotte from
Montreal, with better than 30 years of experience in the
business. He's also recognized as one of the leading
safety experts in the country.
individual who makes up our team is Ron Joyce. Ron is
a well-known and very successful Canadian entrepreneur
Mr. Joe Comuzzi: Mr. Deluce, the chairman is going
to cut me off, and you've answered my question.
From your comments, you're resigned to the fact of the
demise of one of the national carriers. Is that
Mr. Robert Deluce: Our business plan is based
on there being one dominant carrier, and we have been
planning around that scenario.
Mr. Joe Comuzzi: What we're going to develop, Mr.
Deluce, is a dominant national carrier and, through
your proposal, a dominant regional carrier in Canada.
Would that be a correct statement?
Mr. Robert Deluce: I would say that the regional
carrier will be focused on improving and expanding
service to the small-market communities, number one.
Number two, we will be competing on the two triangles
with Domco, if we can refer to the remaining
national carrier as Domco. We'll be competing with
them on those triangle areas. We will be competing
with the remaining national carrier on transborder
routes. As well, we know we'll have competition from
companies such as WestJet that are out there now,
and there may be others like them that emerge. I think
our proposal is one that, if anything, will bring about
a healthier airline situation in the country.
Mr. Joe Comuzzi: Mr. Fontana is prompting me here.
He wants to know how much money you're going to invest
in the Canadian airline industry.
Mr. Robert Deluce: I can tell you that we're
Mr. Joe Comuzzi: The people who got more press recently than
the airline industry are Newcourt.
Mr. Robert Deluce: I can tell you that we are well
financed. The business plan has been well thought
through. I think it's inappropriate to talk about the
actual price right now, because we haven't had direct
discussions with the dominant carrier. I can tell you
there are probably 5,000 people involved in this
collection of regionals. They presently do in excess
of $1 billion in revenue, so it's a relatively large
The one thing I didn't mention is that as part of our
team we also have another large financial institution
that's committed. I can't give you the name of that
institution at this point. We are not allowed to
disclose it. We will be in due course.
Of course the other thing I want to mention—and I
think this is important for you to know—is that there
will be some other investors, who will be announced
shortly, and there will be some Deluce family members
who put real money into this because they're committed
to working with the communities and they believe in
what we're talking about.
The Chair: Thanks, Mr. Comuzzi.
Ms. Desjarlais, please.
Ms. Bev Desjarlais: I have four questions and
I want to get them all in here.
How recently were you formed?
Mr. Robert Deluce: The company has been formed
within the last month.
Ms. Bev Desjarlais: Okay.
You indicate that you're not interested in going into
international markets. Condition 4, page 5:
Regco must be allowed to enter into additional code
sharing/commercial agreements with other carriers, both
domestic and international at cities in both Canada and
I consider the U.S. an international market.
The Chair: Mr. Deluce, did you want to respond to
Mr. Robert Deluce: Did you want me to respond
Ms. Bev Desjarlais: Certainly.
Mr. Robert Deluce: I would consider it
international as well, but often it's referred to as a
transborder market, as opposed to international. So
we're sort of drawing it out as domestic, transborder,
and international. So for the purposes of our
presentation, we're referring to it as a transborder
location. But you're very right, it is international.
Ms. Bev Desjarlais: So it's clear that it is an
Mr. Robert Deluce: Yes.
Ms. Bev Desjarlais: This new dominant regional
carrier, what effect do you see it having on, say,
Canada 3000 or WestJet, or let's say, where we
have Canadian Regional, Calm Air, and Bearskin flying
into, say, The Pas? What effect would this dominant
national carrier have on those situations and those
The Chair: Dominant national or dominant regional?
Ms. Bev Desjarlais: Regional, sorry. Thank you.
Mr. Robert Deluce: If I can respond to that,
what we do will be complementary to what some of these
third-level carriers are doing and will continue to do.
Quite frankly, our program should complement what they
are all about.
With respect to Canada 3000, it's a company I'm
well familiar with because I was involved there for a
number of years. Their focus is certainly on
international and long-haul domestic, so I see our
proposal as being quite complimentary to that which
they are offering. Of course, we can't speak for Canada
3000, and I don't propose to speak for them. From my
perspective, though, I see what we're doing as being
Ms. Bev Desjarlais: Again on the situation of
Canadian Regional, Calm Air or Bearskin
flying into The Pas, if you become the dominant
regional, you would then have Canadian, Bearskin, and
part of Calm Air.
Mr. Robert Deluce: When you look at
Calm Air, there's now a relationship between Calm Air and
Canadian Regional, and we would expect that this
relationship would in fact continue.
Ms. Bev Desjarlais: But what's
going to be out there to ensure that we have
some competition at the regional level?
Mr. Robert Deluce: We're talking about competition
on a transborder basis. We're talking about having
expanded and improved service to some of the smaller-market
communities. We're talking about being able to
provide feed not only to the remaining dominant
carrier, but also to other carriers out there that we
would have code-sharing commercial arrangements with.
This is something new. For the first time, it will
allow some of the trans-Canada charter couriers to
actually sell a ticket right through from Vancouver to
Timmins, for instance, as a result of having this
commercial code-sharing arrangement in place.
Just to reiterate my earlier remarks, the only other
thing I'd like to add in regard to that
is that we've seen where
the most lucrative markets within Canada can't sustain
two mainline carriers—or haven't been able to sustain
them so far—and the regional markets are even more
Ms. Bev Desjarlais: That was another thing I
wanted to comment on, because we have been told that
the regional airlines are very strong. That's
certainly the impression I got from the regional
carriers when they met with us.
Bearing that in mind, I still see you having sort of
the only game in town. If we use the situation of
Canadian, Calm Air or Bearskin going into The Pas,
you're not going to have the whole pie. But why
wouldn't we simply put some rules in place for the
carriers we presently have so that we don't
have this dog-eat-dog world out there and so that we
ensure we're getting the service and the
Mr. Gordon Thompson: As I see it,
and as Mr. Deluce has said frequently, what we're
trying to do with our proposal here today is a number
of things. Very quickly, first of all, we're trying to
create a viable airline operation regionally and for
small communities in Canada, and one that's
financeable. Secondly, it's to provide a quality of
service to the Canadian travelling public so that
they're getting something out of it, relative to Joe's
Ms. Bev Desjarlais: Can you tell me in all honesty
that Newcourt's first reason is to do
that and it's not to make money?
Mr. Gordon Thompson: Newcourt, or any of the other
investors that are involved in this airline.
Ms. Bev Desjarlais: Let's be clear then that,
first, that's your goal.
The Chair: Okay, Bev. You've asked the question.
Let's get the answer, and then we'll move on.
Ms. Bev Desjarlais: Okay, fair enough. Let's get
Mr. Gordon Thompson: The answer is that with an
economically viable airline, we can provide that kind
I guess what I wanted to get to was the point that
seems to be somewhat misunderstood. I remember
appearing before this committee once before, when Reg
Alcock was the chairman. His frequently quoted comment
always was “Don't tell me about Ottawa to Montreal. I
don't want to hear anything about Toronto to Halifax.
Tell me about Wawa to
Winnipeg.” And what Mr. Deluce's team here is trying
to solve is the problem of Wawa to Winnipeg.
The reality in Canada is that there are many areas
where competitive regional service can be very viable.
There may be several players in the triangles, for
instance, with lots of people entering that marketplace
and lots of competition, but there are also many
places in Canada where one airline is too many. What
we want to do is be able to introduce a service that
addresses that problem and not only provides profitable
service for us in the key areas but also serves
profitably those smaller communities. That's what it's
really all about, and that's what makes us different.
The Chair: Thanks, Mr. Thompson.
Mr. Sekora, please.
Mr. Lou Sekora: When I'm listening to you here
today, to me, pricing, service, and employees are what
I'm after—the price of tickets, the job creation and
job losses, and service to different communities across
Canada, not one part of Canada or the other.
When you're speaking, I'm wondering why you people
haven't been to see Mr. Benson from Canadian and
Mr. Milton from Air Canada. Precisely, it would
work very well if you took all the regionals and
everything across Canada and if they took the
internationals. Have you seen them? Have you thought
you here before us saying you want to create this
regional airport or these flights exactly when Air
Canada and Canadian Airlines are looking for somebody
Mr. Robert Deluce: If I may, I will address that
question. Certainly our plan is to put together this
regional network of regional carriers, but on the
assumption that this dominant carrier actually emerges,
we must have some help in ensuring that the dominant
carrier is required to divest itself of those regional
carriers. We don't think they'll do it on their own
without a little bit of nudging from you. Quite
frankly, we think that's an essential part of us being
able to do what we want to do.
In fact, we might not be the only ones out there who
are interested in this; we don't kid ourselves for a
moment. But we have spent a fair bit of time on this
plan and we think it's well founded.
The second thing that has to happen, of course, is
that the policy framework accompanying the divestiture
has to be in place to ensure that there is a solid
platform on which to grow and expand that regional
airline. That means addressing some of the things
we've outlined in our statement that pertain to airport
slots, gates, counter space, and all those types of
things, along with fair treatment with the travel
agencies, computer reservations, displaying, and those
types of issues.
The Chair: Mr. Deluce, I've heard Mr. Sekora's
question. Maybe it would help if you gave a bit of a
definition as to what a regional service is versus what
a national service is. Of course we know what the
international means, but having heard Mr. Sekora's
question, national versus regional might be a help with
the difference there.
Mr. Robert Deluce: Our proposed airline will be
focused initially on the 19- to 70-seat aircraft range.
I think we'll be using staged lengths of under 800
kilometres—that sort of stage length. It means any of
the small market communities. It means short-haul
routes. It means triangles in both eastern and western
Canada. It means short-haul transborder routes. That
is what we consider to be regional, focused airline
Mr. Lou Sekora: I'm from British Columbia. What
would you do that's different from regional air service
in British Columbia now? What would you be doing?
Have you thought about it at all?
Mr. Robert Deluce: Basically it comes back to how
we're going to serve those communities. Our plan is
based on expanding and improving. Our basic focus, as
I indicated earlier, will be on Kamloops instead of
Hong Kong; it will be on London, Ontario, instead of
The other thing, of course, is that our fleet plan
contemplates the introduction of newer, more modern,
high-technology aircraft, including regional jets,
which should be positive for any of the communities
that are involved and presently being serviced by
Mr. Lou Sekora: You have 125 aircraft, you're
saying, ranging from 19 to 70 seats, with 5,000
professionals. I believe that in the regional airline
business now there are probably 7,000 employees, not
5,000, so are you talking about cutting out 2,000
Mr. Robert Deluce: No. Our business motto
contemplates expansion, and because our business motto
contemplates expansion, we do not anticipate any job
losses to occur as a result of it. As a matter of
fact, we will probably need more people. That really
is the premise; it is certainly part of our business
plan to grow and expand these services, and we think it
can be done.
The Chair: Thanks, Mr. Sekora.
Mr. Casey, please.
Mr. Bill Casey: First of all, I just want to say I
like your focus on Timmins and Saskatoon rather than
Heathrow and Rome, as we've heard before.
However, there are some questions. I want to hone in
on that feeder traffic exclusivity. For instance,
InterCanadian now serves Moncton to Halifax and feeds
Canadian Airlines from Halifax to Toronto or wherever.
If your regional
airline provides the same service and they are
guaranteed exclusive feeding rights to the single
dominant carrier, what happens to InterCanadian and the
other independents? I just use that as an example
because I'm familiar with it. If they cannot feed
anyone else, what happens to them?
Mr. Robert Deluce: I think the InterCanadian
situation is a difficult one. They're going through a
difficult time at the moment. We think our solution
can encompass them, and as a matter of fact, we would
welcome it. We've had discussions with them. We're
exploring some options. Quite frankly, I think there's
a solution there somewhere.
Mr. Bill Casey: That brings up some other
questions. You had discussions with the other
airlines. For sure, in some ways this is going to be
reduced competition, where you've said their two
airlines can't viably serve the same market. Have you
brought this to the Competition Bureau? Would it
require another suspension to the Competition Act to go
through this process?
Mr. Robert Deluce: I don't believe it would. We're
operating on a premise that we don't have to. We
wouldn't even be considering anything like that.
In regard to the Competition Bureau, we've made
submissions to them. We've made submissions to
Transport Canada. This is the first official
submission we've made to government, but we have had
these verbal discussions with them. We have presented
what we see as the conditions that need to be in place
to make viable an airline such as the one we've
Mr. Bill Casey: When did you make a submission to
the Competition Bureau?
Mr. Robert Deluce: We made two submissions to the
Competition Bureau during the last 30-day period.
Mr. Bill Casey: Have they drawn any conclusions or
anything? Have you had feedback from them about what
would be required? They were very specific in their
report they did for us regarding a dominant carrier.
One of their recommendations was to have a
Canadian-owned regional type of airline. Was your plan
designed to tuck under that criteria?
Mr. Robert Deluce: Our plan certainly envisions
the formulation of an independent, Canadian-owned,
regionally focused, commercially viable airline that
basically is dedicated to serving the small market
communities and providing a competitive alternative to
Canadian travellers. We think it fits well within the
Competition Bureau generic report; we think it fits
well within the policy framework that Transport Canada
has tabled. I think we're pretty much on track in
terms of fitting into that definition of what is
envisaged here for the Canadian airline industry.
Mr. Bill Casey: I may have gotten it wrong, but
from the major dominant carriers and their proposals, I
got the impression that the regional routes were not
viable but served as feeders to their international
routes. Di I have the right impression? If so, how
can you be viable when they say they're not viable?
That was my understanding.
Mr. Robert Deluce: I think we can be viable by
being more efficient and by putting together this
collection—right now, a loose collection—of regional
carriers. We can better serve and expand service to
these smaller communities. Additionally, I think some
of these routes are viable now and some of them aren't,
but with the right combination of equipment and a
motivated and dedicated workforce in place, I think
these things will all be very positive for what we're
Mr. Bill Casey: There are a lot of companies
involved here. Have you talked to all of them? Are
they receptive to this proposal, or is this a less than
Mr. Robert Deluce: We have had a couple of
informal discussions with Air Canada, but they have not
made any commitments, and I wouldn't expect them to
make any commitments at this particular point.
Our vision is basically based on the assumption that
there will be a dominant carrier. For that vision to
actually take form and become reality, what we need is
someone to say to them that for them to be a dominant
carrier they must divest of their regionals.
do that, put some conditions on them that allow that
regional carrier to in fact launch on a reasonable
platform in order to be viable and at least have some
transitional period under their belt.
The Chair: Thanks, Mr. Casey.
Colleagues, we've done one round.
Gentlemen, we're dealing with a situation right now
where we're faced with what do we do if eventually
there is a dominant carrier in Canada? How do we
ensure pricing and the five principles that have been
outlined ad nauseam?
What you're suggesting to us is a dominant
regional feeder in the lucrative markets to feed the
dominant national carrier. We're trying to find
a solution to address the principles. You have a great
business idea, there's no question of that. I think
everybody here would congratulate your seizing an
opportunity. Of course, it's all built on the premise
that we'll have one carrier, but all we've heard so far
in the press and from Mr. Robert Milton is that they
have every intention of having Canadian operational and
that they will be a wholly owned subsidiary, and so on,
and they're working out possible scenarios with
Canadian being active.
So if Air Canada decides to have
Canadian as a wholly owned subsidiary doing their
thing and Air Canada doing its thing, your proposal
doesn't see the light of day.
Mr. Robert Deluce: Perhaps Gord could speak
to that, but we see Canadian as a wholly
owned subsidiary of Air Canada still being one dominant
carrier. We don't make any distinction between Air
Canada acquiring Canadian and merging it or
operating it as a separate subsidiary.
Mr. Gordon Thompson: I think one of the things in
the discussions we've had with
the Competition Bureau and others, as Bob has alluded to,
and certainly with people
whom Bob and André are very familiar with in the
industry...nobody knows what the outcome of this is
going to be. It's not necessarily a balance-sheet
issue as to how they're going to sort out the debt with
Canadian. It really is a
public policy debate, which was greatly stimulated by
Mr. Schwartz's proposal. But in the context of a public
policy debate, we're trying not to speculate on what
the whole industry is going to look like at the end of
the day. I think that's probably for others.
We're here today because I think we have an exciting
proposal that we can lay on the table, and we can say, in the
context of the redesign of the airline industry in
Canada, that there is a group of very experienced
Canadians who are prepared to put a proposal on the
The Chair: Mr. Thompson, in fact you have to
speculate on what the last scenario looks like at the
end of the day. It's all through your report that
in the event there is one dominant carrier...
So you are speculating that in the event there is a
dominant carrier at the end of the day, here is your
proposal to look after regional services.
Mr. Gordon Thompson: Yes, I understand that.
The one thing, though, where we've gone beyond that
sort of discussion, which we haven't had an opportunity
to talk about here today, is that quite likely in this
industry in Canada, when the dust settles, you
will have a dominant carrier in the big airline
business and you may have a dominant carrier in the
regional airlines, but with several others that are
dominant in markets we're not in, and we're
certainly up to competition in the key triangles.
Third, you could have three or four very large
charter airlines that dominate the charter business in
Canada that have feeder arrangements with either the
national carrier or the regional carrier.
Fourth, for certain you're
going to wind up with at least two or
three very dominant discount operators in this
country in WestJet, Air Canada Light, or whatever
the Hamilton one is.
So I think you're going to have three tiers of
airlines providing all sorts of competition in Canada.
Each of those tiers are bound to have, hopefully,
a dominant, viable carrier.
The Chair: How much does Air Canada make with its
Mr. Robert Deluce: It's difficult for us to answer
that, and I think we'd be speculating. One of the
difficulties in this exercise is that we have a very
strong business model. We're working through our
business plan, and we think it's well-financed, but—
The Chair: But you must have some idea
that Air Canada has a regional service and it makes
Mr. Robert Deluce: We know different elements or
some parts of their regional service do make money, but
we can't tell you what they make or what elements of it
do make money. The difficulty is that we haven't had
access from Air Canada to any financial information,
nor have we had access to any information from Canadian
Regional Airlines, and until such time as we have
that, we really can't be definitive in terms of
business model will look like.
The Chair: This committee has heard that Air
Canada has a successful regional service, and given
that Air Canada has told us that they have a successful
regional service, have you been given some indication
that Air Canada is prepared to say this sounds like
a great idea, go ahead, fellows; Regco, take the Air
Canada regional service?
Have you had any indication of that from Air Canada?
Quite frankly, why should Air Canada give it up
Thirdly, how do you propose to take it from
Air Canada if Air Canada says they're not interested,
that this makes them money and supplies their own ships
Mr. Robert Deluce: On your first question, we've
had no indication from them that they're willing to
sell us the Air Canada connectors or, in the event that
they acquire Canadian, the Canadian Regional Airlines
Secondly, our vision basically contemplates acquiring
these airlines if and when there is a dominant carrier
and if and when the dominant carrier, as a condition of
approval, is told they must divest. If that
is forthcoming, then we'll have a carrier that is
interested in talking to us. Until such time
as we hear from government in terms of that particular
divestiture question, then I think they are going to sit
there and wait until...
I'm speculating here to some extent, and I can't speak
for them, but my guess is that it won't happen until
I'm sorry, what was your last question?
The Chair: How would you acquire if they
said they were not interested?
Mr. Robert Deluce: I think there is no way
for us to acquire these regional airlines presently
owned by Air Canada and Canadian unless they are
willing to sell them.
The Chair: Thank you.
Mr. Stan Dromisky: Thank you very much, Mr.
Chairman. Some of my questions have already been
answered. But this model is very interesting and it
shows me that the industry is quite healthy, that
someone is ready to come in and present a different
However, the success of your model depends upon a
great number of factors. Some of them have already
been dealt with, but I would like to look at just one
and get some clarification from you. When you talk
about enabling employees to have multiple roles, who
are you talking about? Most of these people belong to
unions, and unions have definite stipulations regarding
the kinds of roles they have to play. I'd like some kind
of reaction in that area.
Then I take a look at your conditions, the five of
them you have stipulated. When I look at them
overall, I see, in light of the fact that you have
already stated that to be competitive these conditions
must be met, what you're really saying is to be
competitive you would like the support of probably the
government and the dominant carrier and others to
eliminate competition. There's a contradiction there.
I would like your response to those statements,
especially the one about the unions, and in light of
Mr. Gordon Thompson: I think the best way to
describe this is if Air Canada woke up tomorrow
morning, or indeed Canadian had during their battle,
and decided they could probably sell the regional
airline to somebody for—pick a number—$300 million or
$400 million, and they were to sit down and negotiate
with this group or any other group, therefore, to buy
the regionals—and they're doing this on their own;
they're not being mandated to do it—most of the
conditions you see here today in this document
would be items that would be negotiated on the table by
whoever was buying that regional airline, because
you're not going to buy Air Canada's regional airline
if you don't have gates and slots and feeder. So we're
not buying aircraft; we are buying that franchise.
That's the context in which this either happens by
negotiating with them, whoever winds up at the end of
the day, or if they're not prepared to do it and it's
acceptable to the Government of Canada that they be the
dominant carrier in every aspect of the business, then
fine, we're out of the game. If it's not, then that's
the process we would have to go through. It would be
to negotiate those conditions.
So they're there whether they're mandated by somebody
or negotiated by a buyer.
Mr. Stan Dromisky: How about the unions?
Mr. Robert Deluce: Let me deal with the
employee-related question. Basically, our business plan
is one of expansion and growth, so we see this as being
a positive thing for the employees that are involved.
Firstly, because it's an expansion-related plan, we do
not anticipate any job losses.
Secondly, with regard to the restrictive
clauses presently in place in the Air Canada
collective agreement, if you remove the effect of that
by selling off the regionals to somebody else, that
effectively removes those clauses. If you remove those,
you have an opportunity to introduce modern technology
equipment. That means more opportunities, we believe,
for the employees, including pilots, flight attendants,
and others in these companies, and they haven't had
that available for some time.
With regard to the unions, we recognize that there are
many unions in place, and we would intend to work with
the employees and their unions to bring about whatever
changes have to be made in order to make this thing viable. We
think it will be a lot easier for a regionally
focused airline whose priority is its employees,
to negotiate with,
talk to, and take care of those employees and
their unions, than it will be for an airline that's
internationally focused and thinking about Tokyo and
all those good places.
We are all very aware that there are competing
interests between the mainline carriers and those that
are regionally based. That's playing itself out at
this very moment in some matters that involve the
common employer issue that's before the CIRB.
So those issues, we think, go away, and the situation
is a plus for Air Canada. Whether or not they
recognize it, it's a plus for them and for the
employees. It's a plus for this new airline if in fact
we can put this together.
The Chair: Mr. Bailey, please.
Mr. Roy Bailey: Thank you.
After one month, you say, of being in operation,
you come into this room and we'd almost
think there was some kind of divine intervention
here, but I didn't see any halos on any of your heads.
Your plan is well devised.
Obviously, you've had some reaction. You're going to
have to deal with Air Canada,
Canadian, the workers, and all of this.
I'm interested in the comment you have on page
5, in the fourth paragraph, where you say:
Clearly, however, achieving commercial viability,
and the pro-competitive market impact that our proposal
offers, will depend upon the appropriate regulatory
environment being in place.
By “the appropriate regulatory environment”, do you
mean that you would ask the government in some way to
say to Air Canada or Canadian, look, these people have
a good plan, now enter into a deal and negotiate
properly and we'll have a dominant regional carrier?
Is that what you were thinking of when you made that
Mr. Gordon Thompson: Yes, certainly. None of us
may have any control over it anyway, but if at the end
of the day we wind up with one dominant carrier, then
obviously the rules of engagement for everybody else
who operates in this industry are going to have to
change. Right now those two dominant carriers control
all of the gates and all of the slots. How are the
rest of us to compete at any end of the market if there
are not new regulations put in place?
Mr. Roy Bailey: Does it make any difference to
your group—and you're new on the scene, the new kids
on the block—whether you take all of Canadian plus the
regional lines of Air Canada, or would you rather
just bid on the regional lines and let Canadian become
whatever it will become?
Mr. Robert Deluce: Are you asking
whether we would go ahead with just the Air Canada connector
carriers and not including Canadian Regional Airlines?
Mr. Roy Bailey: No.
Mr. Robert Deluce: I'm sorry, I don't
understand the question.
Mr. Roy Bailey: We have two dominant carriers.
Canadian is the one that is in trouble right now. Your
whole premise is based on one dominant airline. You
want to get access to the regional carriers the two
airlines have. What's going to happen to the national
routes of Canadian and to that
part of the company if you just go that route?
Mr. Robert Deluce: Our proposal is based on the
assumption that in fact there'll only be one national
carrier. Whether that is in the form of a merged
entity, which now looks unlikely, or one carrier
only and the other as a wholly owned subsidiary, we
still consider that to be one national carrier. We
haven't considered what would be done with
Canadian, because we think that's outside of
what we're focused on. Essentially, our focus is
regional. We've looked at and are not interested in
Canadian Airlines. That's for others.
Mr. Roy Bailey: Thank you.
The Chair: Thanks, Mr. Bailey.
Mr. Charles Hubbard: That's okay.
The Chair: Mr. Comuzzi, please.
Mr. Joe Comuzzi: Thank you.
You have been involved with Canada 3000. I've
always been impressed that those folks or the ones at
Royal or the other charters can fly to some places
with the same planes and sometimes provide better
service than the nationals for about a third of the
price. No one has ever been able to tell me why.
The Chair: More people have tried.
Some hon. members: Oh, oh!
Mr. Joe Comuzzi: But I still haven't got the
I'll be frank. Regional airlines charge way too much
money. The other day I took a 45-minute flight from
Thunder Bay and it cost almost $600 return, going back
on the same day. I could have walked around the
counter to WestJet and flown to Calgary for about $280
Mr. Deluce, with regard to service and the nice things
you folks talked about this morning, sometimes the very
price of the service means you have no service, if you
get too far out of line. I see that in a lot of
How are we as a committee going
to lower the prices for the people who fly in the areas you
anticipate flying in? How are we going to lower the
cost of the service? I don't want to hear about
maintaining the prices because of the cost of inflation, etc.
The prices charged by the regional carriers in this country
have to come down.
Mr. Robert Deluce: Our proposal
basically speaks to bringing these four to five
carriers together, and when you operate a larger
regional network, there are efficiencies. Generally
when you have efficiencies, those efficiencies should
get translated into lower fares. And that's what we would
intend to do.
The other thing that becomes a factor here is that
when you allow these regionals to interline and code
share with other parties besides the remaining dominant
carrier, that in itself introduces some level of
competition. You have for the first time an
opportunity to interline and connect from a Canada 3000
or a Royal or a Transat flying from Vancouver to
Toronto and on to Timmins and connecting at Toronto with
the regional carrier. This is something that will
introduce competitive downward pressure on some of
those fares that you're obviously concerned about.
Mr. Joe Comuzzi: Everybody in the smaller
communities is concerned. We have to have some
assurance that these prices are going to come down.
Mr. Robert Deluce: I agree with you fully.
I've lived in northern communities.
Mr. Joe Comuzzi: I know you have.
Mr. Robert Deluce: Our track record I think in
that regard speaks for itself, and the team
we've put together here really involves a
lot of years of airline experience; it involves Newcourt
Capital with good funding. You've got to go into these
things on a good solid platform, and we think we're set
up to do that.
Mr. Joe Comuzzi: Mr. Deluce, your
[Editor's Note: Inaudible]
...when you sold out to Air Canada. You were operating a
pretty good airline there and then you sold out to Air
Mr. Robert Deluce: Well, I can't comment on
what happened to prices after we sold.
Mr. Joe Comuzzi: You and Mr. Fontana have that
elusiveness about some of those answers.
Mr. Robert Deluce: It would be inappropriate
for me to comment about what happened to prices after
Mr. Joe Comuzzi: Thank you.
The Chair: Thanks, Mr. Comuzzi.
Mr. Michel Guimond: Thank you, Mr. Chairman.
The Chair: Just a reminder, colleagues, it's 12.06
Mr. Michel Guimond: And the next witness will be
at 3.30 p.m. We still have time.
The Chair: If you don't mind paying for the room
from 12 p.m. until 3.30 p.m., Mr. Guimond.
Mr. Michel Guimond: Mr. Chairman, I'll try to be quick about
it and go through my series of questions. The witnesses can take
note of them and then respond. Mr. Casey did ask one of the
questions I was planning to put to the witnesses regarding Inter-
My first question is directed to Mr. Thompson. You can take it
down and respond later. I'd like a little more information about
Newcourt Capital. I believe the company is now listed on the stock
market. Are the company's head offices located in Canada or in the
United States? I'd like to know more about this company. If you
have a copy of your annual report, I'd appreciate your forwarding
it to the clerk, so that we can learn more about Newcourt Capital.
My second question is for Mr. Deluce. You talk about
establishing two divisions, one in Eastern Canada and one in
Western Canada. I'd like to know where you intend locating your
head offices? Would they be in London, Ontario or in Hamilton,
Timmins, White River, Montreal or Toronto? Can you answer that
question for me?
My third question is somewhat more complex. As you know, one
of the fundamental rights Canadians enjoy, one as important as the
right of freedom of speech, freedom of expression or freedom of
association, is the right to own property. You are successful,
experienced businessmen. I'm confident that there are many future
projects in the works for you. Life doesn't end at 40 years of age.
You're proposing that the new national carrier be required to
divest itself of its regional feeder airlines and be prohibited
from re-entering this sector for ten years. Do you realize what
In short, you're asking the government to order a form of
expropriation. In other words, if an agreement cannot be reached
with the new management of Air Canada, or Air Canada II, over
mutual acquisition, you're saying that the government should adopt,
or that the committee should recommend that the government adopt,
regulatory measures requiring Air Canada to divest itself of its
regional feeders and prohibiting it from re-entering this sector
for 10 years. This would be a clear violation of the fundamental
right to own property. Would you care to respond to that?
The Chair: Mr. Deluce, do you want to comment on
that? Or Mr. Thompson?
Mr. Robert Deluce: If I could address first the
requirement for them to stay out for the 10-year
period, I think this is not an unusual provision. We're
familiar with 10-year agreements. We've seen them
recently; the 10-year agreement that
presently exists between Air Canada and the Star
Alliance would be one example. A 10-year agreement is not
unusual in the context of aircraft financing.
Additionally, the agreement we entered into as Air
Ontario with Air Canada back in 1987 was a 10-year
agreement. So we think that's not out of the context
of reality. We think that's needed and that's sort of
Then there was another question with regard to where
the main office would be—
Mr. Michel Guimond: I want to hear about the
expropriation. In the first recommendation, you say
the emergent national carrier must divest. This is a
kind of expropriation you ask of the government. I
don't want an answer only on the 10-year period. On
the first part, is it in the direction of the right of
property, of Air Canada to keep their regional lines,
if they want to keep those lines? Will you ask the
government to force the new Air Canada to sell those
Mr. Robert Deluce: That is what we consider one of
the essential conditions of our vision, in terms of the
airline we're proposing to be involved with this
network of regional carriers. We don't think there
will be divestiture unless the condition of divestiture
is attached to the approval they are given in return
for being allowed to have the only mainline carrier.
You either want it one way or you want it the other
way. If you want them to own not only the mainline
carriers but all of the regionals and Air Canada Light
and anything else that is moving, then I guess
that's one consideration. But if you want there to be
competition, then our basic business plan envisages a
new company to be formed that in fact would be focused
on the regional marketplaces, the small market
communities. It would be committed to providing an
alternative choice to Canadian travellers, and that's
The Chair: Thanks, Mr. Guimond.
Mr. Joe Fontana: Mr. Guimond should know that the
Competition Bureau in Canada, or even the justice
department in the United States, always after they
receive a proposal that it's mandated they look at,
just like the CTA, may very well...
The Competition Bureau has already said a dominant
carrier may have to do a number of things. This is
what this committee and the government are going to
have to consider, if in fact Air Canada and Canadian
reach an agreement and there is a proposal. A public
interest test must be done, and the Competition Bureau
may tell them—
An hon. member: —
Mr. Joe Fontana: I'm saying that's going to be
part of the scenario too. It's not as if the
government is going to expropriate anybody, for God's
The Chair: Okay, Mr. Fontana—
Mr. Joe Fontana: Can I just ask something? This is
There are a number of ifs here, but in terms of
investment, do you think the 25% American rule is
adequate? Have you any view on that, based on where
you're going to raise your capital?
Secondly, will you be code-sharing, for instance, with
the Oneworld Alliance and/or U.S. carriers in order to
give maximum benefits to Canadians in those communities
that... As you know, Canadian has one code-sharing
arrangement with Oneworld and Air Canada has the Star
Alliance. I think what you're asking for is maximum
code-sharing with anybody and everybody in order to
give consumers the choice.
Thirdly, if certain things happen, we're left, as a
committee, to decide whether or not we want an
independent regional-based company operating, as
opposed to one that's controlled by the dominant
carrier. At the end of the day, that's going to be the
tough decision: whether an independent carrier, such as
Regco here, is going to be the better choice for
consumers than one that's controlled by a dominant
Could you just answer with regard to the investment
and the code-sharing?
Mr. Gordon Thompson: I'll do the investing first,
because the answer is short.
It's not a problem for us. The people who are
investing in Mr. Deluce's airline are for the most part
people who are involved in the financial service
industry. They're not another airline trying to seek
control of this operation. So we would abide by
whatever the rules of the country are in that regard.
Mr. Robert Deluce: I can add to that, though, that
in the submissions we made to the Competition Bureau,
we did indicate to them that we had no difficulty with,
and as a matter of fact supported, changes in the level
of foreign ownership, up to a maximum of 49%. That was
contained in our submission to the Competition Bureau.
In regard to the question of alliances, certainly
alliances somewhere down the road need to be
considered. We think it's a bit premature on our part
to be thinking about who we would align with. We
haven't yet found somebody willing to in fact talk to
us about buying these airlines, so that's our first
Mr. Joe Fontana: Code-sharing does the same thing.
Would you be code-sharing with United or somebody
else—USAir, Delta? Would you be looking for those
kinds of code-sharing opportunities?
Mr. Robert Deluce: Without aligning ourselves with
any particular alliance, we feel there should not be
any restrictions on Regco in terms of who it could
code-share with and who it could have commercial
agreements with. That's essential if you really want
Mr. Joe Fontana: Agreed.
The Chair: Just as a bootleg, I'll ask one quick
question and ask for a quick answer from you, Mr.
Thompson, since you're the financier. Mr. Deluce
answered the question on the 25%. What about the
individual ownership and the 10%? Should it be 15%,
Mr. Gordon Thompson: The proposal before you
contemplates the 10% rule, but the answer is very much
the same, in that if that rule were to be changed, we
would be supportive of a higher limit. But it's not
germane to this proposal. We can live with it.
Mr. Joe Comuzzi: You can live with what's there?
Mr. Gordon Thompson: That's right.
The Chair: But they wouldn't be opposed to raising
Ms. Bev Desjarlais: I have three quick questions
that can probably have quick answers.
First, what date did you make your presentation to the
Second, do you not consider the 10-year limit as a
10-year guarantee of you having the market strictly to
And third, by enabling employees to handle multiple
roles, are you talking about specifically pilots being
able to go to different aircraft, or are you talking
about, say, flight attendants cleaning the plane
instead of other things? I want the specifics of
enabling them to handle multiple roles.
Mr. Robert Deluce: In answer to your first
question, we made two submissions to the Competition
Bureau. November 1 was one date, and the earlier date
I think was somewhere around October 20 or so. If
that's important, I can certainly get you those dates
and we can get back to you with that. I don't know the
specific dates. I'm informed by Mr. Thompson that
November 1 was the date of one visit.
Secondly, dealing with the 10-year provision, 10 years
is very much in line with the length of time that
normally is in place when one buys something such as
we're contemplating. You need some guarantees with
respect to the business you're actually buying.
Otherwise you might as well be out buying equipment and
just doing a new start-up. So that's not an unusual
With respect to competition, does that put us in any
kind of dominant position? The position we'd take on
that is there are still First Air, Bearskin, Canadian
North, and others, such as WestJet. And we always will
be competing head-on with the dominant regional carrier
on the triangle and on some transborder routes. We're
not looking to have exclusivity or this transitional
business commitment with respect to transborder routes,
but strictly the regional routes where the dominant
carrier doesn't presently have competition.
Ms. Bev Desjarlais: And I asked a question on the
employees handling multiple roles.
Mr. Robert Deluce: That's something that needs to
be developed in discussion with the employees and their
unions. We're not—
Ms. Bev Desjarlais: You speculated as to what you
saw this being, so I'm asking what you saw it being,
because you put it in your presentation.
Mr. Robert Deluce: We saw it being a cooperative
effort in developing potential role-sharing
opportunities and efficiencies, and—
Ms. Bev Desjarlais: To put this in a presentation,
you must have had some idea of what you were looking
at, so please clarify.
Mr. Robert Deluce: To try to clarify that one
ahead of time, without having had discussions with the
employees and their unions, really would be
inappropriate for me to do. There are many things one
could consider, but they're all very much dependent on
discussions with the employees and discussions with
Ms. Bev Desjarlais: So I'll get no answer,
The Chair: Thanks, Ms. Desjarlais.
Mr. Bill Casey: Thank you.
Actually, as Mr. Fontana said, this boils down to the
fundamental purpose of our committee: to help the
minister develop policy. This has to be a policy if
you're going to have any success. Is the government
going to divest the regionals or force the divestiture
of the regionals, or is the government going to allow
them to not divest the regionals?
I don't know exactly when, but at the beginning of the
minister's discussion on this issue, he said his
preferred choice was to divest the regionals, if I
remember correctly. I'm not sure where he said that,
but he did say that. We haven't heard much about it
lately, but we did hear about it at the beginning.
I'm just wondering what your timeframe would be.
Assuming the minister did say we're going to develop a
government policy on transport—which he hasn't done
yet, but if he did say this was going to be the
policy—then you'd have to negotiate deals with
Canadian Airlines or Air Canada. Then you'd have to
deal with the interests of First Air, InterCanadian,
and all the other airlines in Canada. Then you'd have
to go through the labour negotiations. What would you
be looking for as a timeframe?
Mr. Robert Deluce: We're prepared to move very
quickly. We're funded. This game plan has been
developed over a period of time. We see the main
obstacle that keeps our vision from being realized as
the divestiture of the regional carriers by the
dominant carrier. Until such time as that is put in
place, there is very little more we can do.
Some of the issues, as they pertain to employees and
as they pertain to unions that represent the employees,
will be dealt with over a longer time period, while
these airlines are being integrated. The one thing
I can say that's positive in that respect is that
our business plan contemplates expansion, and we don't
anticipate any job losses resulting from what we're
proposing to put together.
Mr. Bill Casey: If it were to go ahead, if the
minister decided the policy in Canada was to divest the
regionals, what would be the impact on the Air Canada
plan? They have a three-prong plan: Air Canada,
Canadian Airlines, and a low-cost airline. How do you
think that would impact on them if they lost the
Mr. Robert Deluce: I can't speculate on that.
That's something Air Canada has to size up and react
to. I do know the plan itself is well thought through.
It ultimately comes back to whether we want better and
improved service to some of these smaller communities
and whether we want competition, both domestically and
on a transborder basis. Our plan offers that.
Mr. Bill Casey: You'd really be competing with the
dominant carrier on lines such as from Halifax to
Mr. Robert Deluce: That's what's anticipated, yes.
Mr. Bill Casey: Okay, thank you.
The Chair: Thanks, Mr. Casey.
Mr. Deluce, Mr. Thompson, and Mr. Lizotte, thank you
very much for making your presentation to our committee
and answering all our questions. If you have any
information to forward, please do so through the clerk
of the committee so that we may all receive it. Thank
Mr. Robert Deluce: Thank you very much.
The Chair: Colleagues, we'll see you at 3:30 for
our next meeting. We're adjourned.