STANDING COMMITTEE ON TRANSPORT
LE COMITÉ PERMANENT DES TRANSPORTS
[Recorded by Electronic Apparatus]
Tuesday, November 23, 1999
The Chair (Mr. Stan Keyes (Hamilton West, Lib.)):
Good afternoon, colleagues.
Pursuant to Standing Order 108(2), this is our 26th
meeting to study the future of the airline industry
in Canada. We have as witnesses Joe
Randell, Air Nova, Air Ontario, and Air BC president
and CEO; and Laurel Clark, vice-president, customer
advocacy and organizational development.
Welcome to the Standing Committee on Transport. We
look forward to your presentation of between ten and
twelve minutes before we get to some questions.
Mr. Joseph D. Randell (President and CEO, Air Nova;
Interim President and CEO, Air Ontario and Air BC):
Mr. Chairman, honourable members, thank you for the
opportunity to appear today before this committee.
Thank you for the opportunity to appear before you
today to discuss the future of the industry from the
perspective of the Air Canada regionals. I am pleased
to represent the 3,000 employees of Air Canada's
regional carriers: Air BC, Air Ontario, and Air Nova.
The Air Canada regionals play a significant role in
the Canadian airline industry. Each regional has its
origins with local entrepreneurs who focused on
regional routes and meeting the needs of local
communities. Our success continues to be based on that
same focus on regional markets along with the feed
relationship with Air Canada. An open dialogue with
our customers ensures that we meet their needs.
Today the Air Canada regionals operate over 660 flight
sectors every business day, more than either of the
major airlines. We operate to 83 destinations and
carry 4 million passengers annually. Combined, the
Air Canada regionals contribute approximately $800
million in revenues annually. The regionals are vital
supporters of economic development in the communities
they serve. In 1999 the regionals will contribute $600
million directly to the economy, and this does not
include the significant economic spinoffs.
Among the scheduled carriers, regionals generally have
the greatest staff productivity and the lowest costs on
many critical measures. Reputed as having the best
aircraft utilization in the world, the Air Canada
regional fleet of 82 aircraft includes ten Bae 146
77-seat jets, 67 Dash 8s, and five Beech 1900Ds.
Although feed is an essential role of the regionals,
we also offer extensive local service. For instance,
Air Nova's markets are approximately 60% to 70% local.
There are some great examples of partnering with
communities to promote economic development.
In several communities, especially in northern or
remote locations, the Air Canada regional provides the
only scheduled service. The fares of high-priced
monopolies that have been circulating in the media
recently cannot be further from our experience. We've
worked closely with the stakeholders in developing
pricing strategies and tailoring the product to meet
the needs of the markets, ensuring the ongoing
viability of the service.
In communities north of 60, Canadian Transportation
Agency regulation provides an added avenue for
customers concerned with pricing.
Regional carriers specialize in meeting the needs of
business customers by providing convenient connections
and flight frequency among smaller communities and hubs
or larger centres. Smaller-gauge turboprops and
regional jets are the aircraft that best meet this type
of market demand. This type of frequent service cannot
be provided cost-effectively by a major airline, and
neither is the market demand adequate for larger-gauge
equipment offering the same frequency.
However, regional carriers are not low-cost carriers.
This has to do with market size. We operate in markets
of lower passenger demand and yet offer the advantage
of frequency that larger communities enjoy.
Though there is in general a 20% to 30% differential
in wage costs and productivity rates with the majors,
the per-seat cost of flying small-gauge aircraft is
higher. Regionals are also harder hit by costs related
to airport charges and landing fees due to the number
of flight movements.
In addition, regionals owned by a major airline face
labour pressures on wage costs and pay benefits. As a
result, owned regionals have wage costs that are
approximately 20% higher than independent regionals.
The Air Canada regionals have seen a number of changes
in the last twelve months. On November 12, 1998, Air Nova
and Air Alliance announced their intention to
consolidate, and by April 1999 the corporate and
commercial consolidation was completed.
The objectives of the consolidation were to improve
the service in eastern Canada and to provide the growth
opportunities that were not open to the organizations
as separate airlines. Air Nova was facing geographical
and fleet restrictions and Air Alliance was
experiencing a financial crisis primarily as a result
of the downturn in the Quebec market.
I'm pleased to report that the consolidation has been
judged a success by the vast majority of our customers,
our employees, and our shareholder. Through
improved utilization of both aircraft and resources,
we've been able to increase our service to the Quebec
market by up to 35%. As a result of increased flying
and enhanced customer service levels, we have created
employment in both Quebec and Atlantic Canada. In the
first year of consolidation, Air Nova will surpass the
income level originally budgeted for the two airlines
Based on the early success of the Air Alliance and Air
Nova consolidation, I was asked to lead a review of
potential opportunities from further consolidation of
the regionals. During this review, I've been named
interim president of Air Ontario and Air BC. Although
we had hoped to have an approved action plan by this
fall, decisions regarding the future of the airlines
have been postponed until the structure of the industry
The regionals strongly support Air Canada's plan for
restructuring. The plan ensures the continuation of a
vibrant regional airline sector. It guarantees
regional service to all communities currently served by
either of the two major airlines or their subsidiaries.
Communities not currently served will have the
opportunity to negotiate with the airlines for service.
Together with Canadian Regional, we will optimize our
schedules where surplus capacity exists. Our employees
have been given assurances of job security, so
important during these times of uncertainty.
Air Canada has publicly stated that it intends to
continue to own the regionals. The regionals want to
retain the present relationship, as it is critical to
both Air Canada and the regionals. In 1998 the
regionals accounted for 12% of Air Canada's passenger
revenues and contributed $283 million in annual
passenger fees to Air Canada.
The regionals also provide local market knowledge and
expertise. Working together with Air Canada, we are
able to design the schedules and products to best meet
the needs of these regional markets.
The relationship with Air Canada and the Star Alliance
provides the regional carriers with access to a global
network and the customer loyalty program Aeroplan.
This has extended these products and services to small
communities. Benefits also include access to Air
Canada's distribution systems, technology, and
purchasing power, as well as shared resources in such
areas as ground services.
Should a sale of the regionals ever be contemplated,
we agree with Air Canada that any sale must be
conducted on a proper and orderly basis and that
maximum shareholder value must be realized.
Although Air Canada's plans will make significant
inroads to ensuring a strong airline industry in
Canada, a number of very serious issues face the
regional airline sector. I'd like to take this
opportunity to highlight these and to ask that you take
them into consideration as you help shape the future
direction of the industry.
The main issues are growth restrictions and escalating
costs resulting from devolution of airports and airport
The future of the Air Canada regionals is very much
tied to a growth strategy. The ability to grow is very
much dependent upon gaining flexibility with respect
to fleet. Simply put, the regional airlines need to be
operating regional jets. Air Canada's management
supports this goal, and we are committed to working
together to overcome the hurdles, specifically the
scope clause between Air Canada and its pilots, that
prevent us from operating to our potential.
Although scope clauses are a fact of life for regional
carriers with relationships with a major airline, we
have the most restrictive scope clause in the industry.
The scope clause restricts the regionals to flying
turboprops of 70 seats or fewer, with the exception of
the existing five jets flown by Air BC and the five
flown by Air Nova.
In the United States, Proposition RJ is a lobby
effort aimed to rule scope clauses as anti-competitive.
Studies by GMKG Consulting suggest that if the
current scope clauses in U.S. carrier agreements remain
unchanged, over 800, or half, of the potential regional
jet markets would be unable to receive new service.
We've identified a significant number of new or
supplemental services, translating into up to 26
additional small jet aircraft, that could be introduced
to the benefit of Canadian communities and businesses
if we had the flexibility to operate additional jet
Ironically, Air Nova was the first airline in the
world to have options on the CRJs, and we worked
closely with Canadair to develop and design the
aircraft to best meet the needs of the regional
markets. We look forward to working with Air Canada to
overcome these restrictions.
Growth of the regionals is also dependent on cost
containment. We must be cost competitive with the
U.S.-based carriers and other regionals. Customers
must feel that the value we provide outweighs the cost
differential vis-à-vis alternate modes of
transportation. And we must
continue to provide a low-cost
feeder service for Air Canada. Although this is key to
our continued success, we are operating in an
environment of escalating costs, mainly due to the
commercialization of airports and air services.
I had the opportunity last week, with fellow ATAC
members, to present many of these issues to some
members of this committee. I'll highlight them again
briefly and provide some examples of the financial
impact these have had upon the regional carriers.
On airports, the regional airlines support the
principles behind commercialization. However, the
devolution of costs has been alarming. We are
concerned with Transport Canada moving to full cost
recovery and the lack of fiscal support for smaller
airports. Air carriers will face decisions regarding
reduced service or abandonment, given the economics of
operating into these locations. It may be time to look
at a model such as Essential Air Services
in the U.S., which was developed to ensure service on
I'll briefly run through the rest of what's in
the paper. I have outlined that
airport costs have escalated by 64% since 1995. As
regionals, we pay an additional $18 million annually to
operate into these airports. At some airports we have
airport improvement fees that are now close to $20.
Although we support the Nav Canada model, we believe the
rate structure penalizes the Dash 8.
Explosive detection systems are presently required to
meet international security requirements.
They should be funded by government and not added to
the operating costs.
On security, we are very concerned about the latest
proposals that would require us, as regional carriers,
to have three security personnel, versus the more
reasonable two, at selected smaller stations. In some
cases we'll have more security personnel than
passengers boarding the airplane. That will cost us
roughly an additional $1 million in 2000.
We pay for policing services now $750,000. We have
harmonized sales tax on airfares in three of the
Atlantic provinces, adding another 8% to leisure trips.
We pay the fuel excise tax, which is inconsistent with
the principles related to GST and adds another $7.5
When you add all these together, people talk about the
high level of airfares at the regional communities we
serve, but you can hardly be surprised when you look at
what we've been faced with.
In this environment, we find we are forced to compete
with other modes of transportation, such as VIA Rail,
which receives a heavy level of subsidization, and of
course roads, which are heavily subsidized as well.
I want to highlight a couple of points here that
are really important to get across. The
industry review comes at a critical time, and the Air
Canada regionals have worked extremely hard to build
the strong franchise that exists. It needs
to be maintained.
Air Nova and Air Ontario are financially strong, and
it would be unfair to their employees, who have
exhibited tremendous focus and commitment, to see the
value and future success of these airlines
diminished through a loss of the exclusivity of the Air
Canada franchise. In the west we recognize the
need for rationalization due to financial challenges
that exist in that marketplace.
We play a vital role in the industry. We
have a significant amount of expertise in this business
and are critically affected by any restructuring of the
industry that may occur.
The Chair: Thank you very much, Mr. Randell.
We will now move to questions of the witnesses.
Val Meredith, please.
Ms. Val Meredith (South Surrey—White
Rock—Langley, Ref.): Thank you, Mr. Chair.
Thank you, Mr. Randell.
I find some of the comments in your presentation
interesting. On page 4 you make a comment about
growth restrictions. You imply that part of it is the
scope clause that prevents the regionals from flying
jets. You say Air Canada's management supports
this goal, but its pilots prevent you from operating to
your potential. Who runs the company, the pilots or
Mr. Joseph Randell: Management runs the
company, but the inclusion of that scope clause was
done a number of years ago. Different circumstances
existed in the business at that time.
A collective agreement was negotiated between Air
Canada and the pilots, which saw wage rollbacks at the
time, as a result of the economic pressures that
existed. It was included in the collective agreement.
I can't say that as a regional carrier I agreed with
that. However, it was included at that point and still
exists in the collective agreement today.
Ms. Val Meredith: But my understanding is that the
regionals have taken Air Canada to court on common
employer status. It is in a hearing. Has that been
resolved yet? If it has not been resolved, why would
you feel that Air Canada, with a monopoly, would treat
the regionals any differently from the way they treat
them right now?
Mr. Joseph Randell: It makes economic
sense for regional carriers to operate regional jets.
When we look at the structure of the industry, it
is generally accepted that that
is where these aircraft are
operated. In terms of Air Canada's determination to
make this happen, that's probably a question you can
ask Mr. Milton. However, from my discussions with him,
I know he really believes it is necessary to make a
change in this agreement.
You are right about the present decision before the
CIRB with regard to common employer. There are two
aspects to common employer, however, in the present
application before the CIRB. The CIRB application
specifically talks to the bargaining unit, the
integration of units, and the integration of seniority
lists, which is something we as regional carriers
have objected to, as it will serve to increase our
What we're really looking for as a result of this
change, and hopefully as a result of whatever decision
comes out of the CIRB, is the flexibility we need
to operate, as regional carriers, regional jets.
Ms. Val Meredith: But that has been before the
CIRB for two or three years now. Has it been settled?
Mr. Joseph Randell: It's been at least that long.
decision was due this fall, and I understand it was
extended for another 90 days. It is yet to be made
Ms. Val Meredith: Thank you.
The Chair: Thanks, Ms. Meredith.
Mr. Fontana, please.
Mr. Joe Fontana (London North Centre, Lib.): Thank
you, Mr. Chairman, and thank you to Mr. Randell, who
happens to head up one of the finer regional carriers,
coming from London, Ontario: Air Ontario. They're
appreciated very much. The fact that I have to
take 55 airline trips a year makes all the difference
in the world. I like the Dash 8, but I'm telling you,
I'd love to have RJ service between Ottawa and
The Chair: You have one minute less in your
questions, Joe, so far.
Mr. Joe Fontana: Let me get to the crux of the
issue here. Regionals
started off, really, as independents, until such time
as both airlines, Air Canada and Canadian, thought
ownership was a way of building that
relationship, building that market. As you said, you
carry an awful lot of their traffic that will go on to
other places, both domestically and nationally, but you
also bring their people back to their homes.
That's why regional services to the
communities are absolutely essential if we are to think
about the consumer in this whole equation.
Over the past number of years—and I will ask
Mr. Milton this—there's been a concerted effort,
in my opinion, to keep the regionals from
growing too fast, because in some cases you even
compete directly with them. Let's face it:
when they own you, they control you. They tell you what
your schedules are, they tell you what equipment you
can use, and they tell you how much you have to charge
the customer. You in fact are at the mercy of Air
Canada, albeit that I'd like to think you have
some sort of autonomy, and therefore I would agree
That's why I want to ask you, and then Mr.
Milton, how is that going to be different under his new
proposal if he hasn't allowed you to get the
RJs? The customers have demanded that.
If you want to grow the market, and the market says
you need additional flights to other destinations, you
need better equipment, and you need all of this....
You've been prevented from doing so. Can you clarify
that position for us?
Mr. Joseph Randell: Well, first of all, in terms of
competing, you're right: we do not compete with Air
Canada. We work very closely with Air Canada in the
development of schedules and in the development of the
network, and we do have significant input in terms of
the schedules. A lot of the
regional efforts and the new routes that have been
developed have been a result of the work that's been
done at the regional carrier level, and not at Air
Canada. But in terms of competing, we do not compete
with Air Canada—you're absolutely right—because we
operate a complementary product, and that is the way
it is designed for customers.
The issue has been—and it's not unlike any other
major in a relationship with its regionals, whether
they're owned or non-owned—where the demarcation
line lies between the role of the regional carrier and
the national carrier. What I'm suggesting is that
in the case of the Air Canada regionals, it would be
nice if the demarcation line were in a little different
place so that we had the flexibility to operate the
But in terms of new markets, in terms of working with
Air Canada, we have in the past worked and
I've worked in an
environment where Air Canada was not the controlling
shareholder and others were. We still worked with Air
Canada very much in the same way, doing things on a
complementary basis. If you're in a partnership or an
ownership, generally it works a lot better if you
cooperate rather than compete.
Mr. Joe Fontana: You've indicated that Air Canada
would like nothing better than to give you RJs. I
beg to differ. The fact is they've had ten
years, or even five years, to offer you RJs. I know
Bombardier is very busy. I know if you order one
today, you're going to have to wait three years anyway
to get one, so it's not as if you can get one tomorrow.
But your customers have been demanding it.
Air Canada, as your so-called partner, as your owner,
is really concerned about the customer.... At the
end of the day, that's who I want to focus on,
the customer in those communities you serve,
those 83 communities across the country you are
bringing service to, because in some cases there's no
other alternative. I'm a little worried if
there's only one alternative at the end of the day,
that dominant carrier that controls everything from
domestic to international to regional, and even a
discount airline. That's one
big boss calling the shots on pricing, scheduling, and
everything else. I'm getting a little nervous,
especially based on the record of this boss in
the past five years in terms of giving you the
equipment you need.
So I'm just wondering about these scope clauses and
whether or not Air Canada is really on the same page
when it comes to giving the regionals what they need
and want in order to provide service at the community
and regional level.
Mr. Joseph Randell: To respond to
that, as I say, there has been a change of leadership
at Air Canada over the last number of months. Based on
my discussions with Mr. Milton, I'd say he is
determined to make this change. However, he has to
respect a collective agreement that was negotiated in
good faith, of course. No party in this country is
unable to do that, and discussions and
negotiations would definitely have to occur to
influence it. The decision that may be coming down
from the CIRB—we're not sure at exactly what
time—may have the ability to influence that decision
But the determination is there. The circumstances
Air Canada went through in the early 1990s, in terms of
the financial crisis the airline faced at that time,
did require some very difficult decisions.
Unfortunately this was one decision made that actually
hurt us, but it was made in the interest of improving
Air Canada's viability.
In terms of the country and the feed—and I speak about
the exclusivity here—as an industry, we
have been put in this position ever since
proposals were put forward a number of months
ago that essentially said that in this business, you
can't fail. When you can't fail in this business, it
presents some real problems for us all.
The Chair: Mr. Guimond, please.
Mr. Michel Guimond
(Beauport—Montmorency—Côte-de-Beaupré—Ile-d'Orléans, BQ): Thank you,
Thank you for your presentation, Mr. Randell. You realize that
the objective of this committee is not to scrutinize closely all of
the offers on the table, but rather to try and identify certain
components for inclusion in a policy framework on the airline
industry in Canada. That's the role I see for our Transport
Committee, which will be asked to make pertinent recommendations to
However, it's hard not to talk about the offers on the table
because they affect to some extent our perception of certain
services. That's why I'm confident the chair won't interrupt me and
will allow me to ask you the following question.
Last week, a group headed by Mr. Deluce, who was testifying on
behalf of Regco, implied that if Air Canada became the dominant
industry player, it should be forced to divest itself of its three
regional carriers and of Canadian Regional.
I'd like you to comment on this position because ultimately,
Air Canada will retain 100 per cent ownership of the regional
carriers. Do you think the government should force Air Canada to
sell off its regional carriers?
Mr. Joseph Randell: No, I do not think there should
be a forced sale of the regionals. The relationship
between a main-line carrier and its regionals goes far
beyond ownership. As regional carriers,
we extend the brand and the presence of the national
carrier in the marketplace with regard to the code, the
frequent flyer program, etc.
The relationship between the regional and the main line
in that regard has to be a cooperative one. If
it isn't a cooperative one, then the customer won't
make the proper connection, won't achieve the
benefits of having access to that network.
For people in smaller communities in this country,
it's absolutely necessary that these smaller
communities have access into this network. Whether it
is owned or non-owned, there are all sorts
of examples of this in our industry. What it
comes down to, though, is the importance of
that business relationship between the regional carrier
and Air Canada, or the national carrier, the main line, and
their ability to make it work from a cooperative point
of view. It's very difficult to do that and
be in full competition or in a non-cooperative
environment, because as a result of
that, I really do believe the consumer will suffer.
Mr. Michel Guimond: Mr. Randell, in your submission, the
French version of which does not contain any page numbers—no
matter, we're used to that—, you state that together with Canadian
Regional, you will optimize your schedules where surplus capacity
Perhaps it's merely a question of semantics, but I'm worried
about your choice of words. You talk about optimizing schedules,
but perhaps you're also implying that you will optimize the type of
aircraft used to provide service to the regions. As I pointed out
to you in April when Air Nova and Air Alliance merged, I'm
convinced that in order to have viable regional services, we need
proper aircraft and quality services. You use Beech 1900 aircraft
on some Quebec routes, with no flight attendants, which could
compromise passenger safety. We mustn't forget that the primary
responsibility of flight attendants is not to serve passengers
meals, but to ensure their safety while in flight.
It worries me and scares me to hear you say things like this.
Anytime a reference is made to surplus capacity, the implication is
that the number of aircraft in service will be cut, that some
services will be eliminated and that cuts will be made to ensure a
better return on investment.
Would you care to respond to this?
Mr. Joseph Randell: Well, first of all, as a
result of the Air Canada proposal where the regional
carriers would be feeding both Canadian and Air Canada,
there's a difference. In the west you
have two wholly owned subsidiaries of both Air Canada
and Canadian Airlines.
In the west there are
significant financial difficulties in the
There is excess capacity. It's a different
operating environment, and it is necessary to
rationalize the schedules in the west. I think the
example has been given before as well of where you have
both carriers operating, and really the opportunity is to
operate a larger aircraft on a route, rather than having
two smaller airplanes operating at the same time.
Exactly how the west will be rationalized I don't know.
It requires a lot of thought.
The east is a different situation. In the east the
only wholly owned subsidiaries are Air Nova and Air
Ontario. As such, being able to feed both Canadian
Airlines and Air Canada, which is the Air Canada
proposal, would as well allow us to potentially look at
up-gauging the equipment and increasing the size of the
equipment we operate.
In the present environment, yes,
we do operate five Beech 1900s. They are operated
primarily within Quebec. A number are operated
in western Canada by other operators that are
non-owned. These Beech 1900s have proven to be very
reliable. Although there is no flight attendant, we've
put an in-flight service on board, etc.
The difficulty is the operating costs are such
that if we didn't operate those airplanes, there would
actually be no service, because the economics and the
costs of operating the Dash 8 are such that we would
not be able to operate some of the routes on which we
operate today. The Beech and its economics
allows us to do that. In some cases we actually
increase, and as a route develops, replace the Beech
with the Dash 8. So the Beech has also proven to be a
good developmental airplane in entering new
markets. For example, we just entered Montreal to
Portland, Maine. Eventually we hope that route, for
instance, would grow into a Dash 8 route. So it's
really driven by economics.
From a customer service point of view, I'm sure
generally speaking larger jet airplanes are what
customers would prefer. But you have to remember
we're operating in a different economic environment in
these markets and in these routes. It's a matter of
what the total offering is of revenue versus what your
costs of operating are. That's the balance we try to
The Chair: Thanks, Mr. Randell.
Mr. Stan Dromisky (Thunder Bay—Atikokan, Lib.):
Thank you very much, Mr. Chair.
I would like to
continue and follow through with the kinds of thoughts
Mr. Guimond was expressing. But before I go on
with my main question, I'd like to get some information
We're talking about three different air carriers
right now. Who owns them? Are they
separate corporate entities? I'm talking about
separate entities. Because many people
think Air Canada owns those three companies. Could
you clarify that?
Mr. Joseph Randell: Air Canada does own all three
companies. They are wholly owned subsidiaries of Air
Canada. Each company has its own board of directors,
the majority of whom are outside directors. These
directors carry full fiduciary responsibilities related
to these regional carriers. They are 100% owned by Air
Mr. Stan Dromisky: That's a very
important point. In your brief you indicate you
are quite willing to carry on with this relationship
you have with Air Canada, although you have separate
boards and so forth. However, I'm wondering if you
would have any specific objections to a move by a
dominant carrier such as Air Canada getting to the
table and saying, “Okay, fellas, we're going to
separate. We're going to sever the relationship.
You're going to become separate entities, and you'll
have to start negotiating all over again with
absolutely new contracts.” I'd like a
reaction to that.
Keep in mind though what the Competition Bureau has
stated. The Competition Bureau has already told us
that if divestiture does not take place, competition is
not going to be there—the kind of competition we would
like to see. So could you respond to what I have said?
Mr. Joseph Randell: We are very much integrated into
the Air Canada network, as is I'm sure Canadian
Regional into the Canadian network. In terms of
starting over and renegotiating agreements,
what is fundamentally most important to us is
the whole issue of the exclusivity of the feed
arrangement. We are best equipped in
this business to feed the major carrier, and we have the
expertise and the necessary structure to do that. It's
very important we retain that.
At the same time, one of the things
contemplated in the Competition Bureau document is the
issue of access to the major carrier by others. That
would be a very significant concern to us, because in
effect by doing that, we lose our franchise as
regional carriers. Especially the carriers in the
east become very vulnerable to attrition. Being
wholly owned subsidiaries, we would actually be at a
disadvantage because of primarily our costs. You have
to realize that in general, the subsidiaries operate at
higher cost levels than the independents.
Mr. Stan Dromisky: Okay, thank you.
The Chair: Thanks, Mr. Dromisky.
Just as a point
of clarification, the competition commissioner, who did
appear before us, did not say the dominant
air carrier would be forced to divest the regionals, in
their opinion. In fact they were
very cautious in their approach and said
it would take a much more detailed study or review
before they would even suggest the regionals
should be divested from the dominant.
Ms. Desjarlais, please.
Ms. Bev Desjarlais (Churchill, NDP): Thank you for
that clarification, Mr. Keyes, because that's exactly
what I thought had taken place as well. So I'm glad
I'm going to try to fit as many questions in here as
possible, so if you can give me the shortest answer
possible while still getting the answer out there, I
would appreciate it.
Did you support the devolution of the airports in Nav
Mr. Joseph Randell: The principles associated with
the devolution, yes, we did support.
Ms. Bev Desjarlais: Okay. When were you named
interim president of Air Ontario and Air BC?
Mr. Joseph Randell: I was named interim president of
Air Ontario in March and interim president of Air BC
Ms. Bev Desjarlais: Okay. And I just want to
clarify something. When you were talking about the
security at airports, you said there are situations
where you'd have more
security than passengers. My understanding is there
was a rule in place that if you had below so many
passengers, you were able to have fewer security
guards, if it were just an airport where, say, one
going out. Is that not still the case?
Mr. Joseph Randell: Actually, there is a rule that
states we don't have to have security at all. But we
believe in providing security for the benefit of our
passengers. One of the issues is that when
people operate or fly into these major airports, it
becomes very problematic if they have to operate—
Ms. Bev Desjarlais: Okay, I'm going to stop you
there, because you gave the impression there was a
requirement to have more security guards or security
there, even if you only had one or two passengers. Yet
you verified what was going to be my next question.
I know security was
taken out of a number of airports in Canada, which
created some concern amongst smaller communities. I
just want to clarify exactly where it was. There
is a rule in place at a number of airports that there's
no security required. Is the other rule still in
place, then, that if you have only so many passengers,
you can have less security available?
Mr. Joseph Randell: No. The regulation we're
faced with is that as long as we have security, we have to
have a minimum of three people at the security clearing
station. It's either zero or three minimum.
We're suggesting the three
Ms. Bev Desjarlais: Previously, when
the other rule was in
place and there was security at all airports,
including a number of smaller airports that no longer
had to have security, was there not a rule in place
that if you had only so many passengers, you could have
fewer security guards?
Mr. Joseph Randell: I'm unaware of that rule. I
Ms. Bev Desjarlais: You mentioned the operating
cost of the Beech compared to other aircraft. Is
that lesser operating cost simply because you're
carrying fewer passengers and so you have a smaller
aircraft? Or would a prop plane such as the Dash 8-300
be more economical than a Bae 146?
Mr. Joseph Randell: It's all a function of the market
size. If you have a very small market, your trip cost
becomes very important. But you have to realize that
the smaller the aircraft, the more expensive it is to
operate on a per-seat basis. Then you get into this
trade-off on the per-seat operating cost versus the
trip cost. That's the balance we always
strive to attain in our business.
Our philosophy in
regional markets is to go with high frequency. Rather
than sending one flight a day with a big aircraft, it's
to operate six times a day, because we believe that's
more in the interests of the travelling public.
Ms. Bev Desjarlais: So on top of the
scope clause that would restrict RJs from going
into areas, by that restriction being in place, there's
also an increased cost for the consumer in smaller
areas, simply because of the type of aircraft that can
be flown in there and the number of trips that have to
Mr. Joseph Randell: We believe if we had the
flexibility to operate regional jets, that would
help to actually lower our costs in providing
some of these services.
Ms. Bev Desjarlais: Between the Dash 8-300, with a
capacity of 50, and the Bae 146, with a capacity of 77,
apart from the pilots and the flight attendants, which
has a greater operating cost?
Mr. Joseph Randell: The jet certainly has a
greater operating cost.
Ms. Bev Desjarlais: Okay. Thank you.
The Chair: Thanks, Bev.
Mr. Sekora, please.
Mr. Lou Sekora (Port Moody—Coquitlam—Port Coquitlam,
Lib.): Thank you very much.
You have Air Canada and Canadian Airlines
in the big plan in Canada, and then you have the regionals
that are either part of Air Canada or Canadian. Is
Mr. Joseph Randell: That's right.
Mr. Lou Sekora: If you had, let's say, separation
of the small regionals away from Air Canada and
Canadian Airlines, how do you see that being a
different company altogether?
Mr. Joseph Randell: We operate as a separate
corporate unit at the present time. In whatever new
structure comes from the reshaping of this industry,
the relationship between regional carriers and the
main-line carrier in terms of access, code, feed, and
all of those things is critical, because we have to
extend the network into the smaller communities. The
major airlines can't do it. We are best equipped to do
Mr. Lou Sekora: But you're not really operating
separately when your boss is the boss of Air Canada.
How can you say you're operating separately if the guy
who is your boss holds the whip and hammer over
your head and says, “Thou shalt not do this” or “Thou
shalt not do that”? How can you say you're independent?
You're not independent.
Mr. Joseph Randell: We are not independent to the
fullest extent in terms of having total control over
our destiny. That is true. But at the same time we
have a role within the airline
group, and that is what we focus on and that is what we
Mr. Lou Sekora: I'm talking about a total
divestiture from Air Canada and Canadian to where your
boss is not the boss of Air Canada; your boss is
somebody else who operates at arm's length from those other
Mr. Joseph Randell: As long as we have
the role of feeding the main-line carrier, whether or
not we're owned, we will have to negotiate with the
main-line carrier to provide the feed and the access to
services that are required for these markets.
Mr. Lou Sekora: There are also discounts
in the west with regional airlines. How do you think
it would work out in the east?
Mr. Joseph Randell: It's very clear that WestJet
has had a significant impact in western Canada,
and it has created some significant
issues in the regional airline business and also for
airports. We're struggling with that. Western
Canada is a significant financial issue for
the industry right now, no question.
Mr. Lou Sekora: What about pricing? I'm from the
west coast. Sometimes I go on a 10-minute flight, and
it will cost me about $300 return. If you go, let's
say, from Vancouver to Prince George, it's something
like $700 return for about a 45-minute flight. That
seems awfully expensive. It seems to be a little
lopsided. To me it seems like gouging.
Mr. Joseph Randell: I hear this constantly from small
communities and short-haul air travellers. A few
moments ago I attempted to outline the cost pressures
we face as regional carriers. We operate high-frequency
service using smaller airplanes. That in itself is
more expensive. Our per-seat operating costs are
actually higher than for larger aircraft, and so much
of the cost is associated with getting the passenger on
the aircraft and getting the aircraft off the ground.
When you look at what has happened with our fixed
costs, it has created tremendous cost pressure for the
short haul. The very concern I was trying to put
forward here is that we do run the risk of actually
destroying the short-haul business in this country.
Mr. Lou Sekora: Are you saying that if you had all
jets, even the small F-28s, they
would be more efficient?
Mr. Joseph Randell: Only on certain stage lengths,
because operating jets on 100-mile stage lengths would be
extremely inefficient. Their fuel prices, etc., would
just be too high, and
there's very little difference in the flight time in any
event. It has to do with the costs associated with
operating the airplane.
We were faced with a lot of price resistance in some
of our markets in terms of the regular fares. In
Quebec and Atlantic Canada within the last year to two
years, we introduced a complete system of what's called
last-minute discount fares for business travellers,
whereby you get a 60% discount. You can book anytime
within two days of flight departure, non-restricted, no
penalties, etc. For us the whole effect was
revenue-neutral, but we carried more passengers as a
We're getting to the point of diminishing returns
where we're pricing ourselves out of the market, but we
can't afford not to put up fares. And people have other
modes to choose from. This is where we become very
concerned. In the air mode, especially in the short
haul and in smaller airports and services, our costs
are just out of control. We really need to look
at how we service these communities and what the other
modes are, because we're doing a very good job of
driving people out of the air and into using their cars and
other modes. If that's what we want to do as a
country, then we're succeeding, unless we
address some of these issues.
The Chair: Mr. Casey, please.
Mr. Bill Casey (Cumberland—Colchester, PC): Thank
you, Mr. Chairman.
A few minutes ago you said you wanted to keep
the feeder franchise, because regional subsidiaries
operate at a higher cost level than regional
independents. Why is a regional subsidiary more
expensive than a regional independent?
Mr. Joseph Randell: A regional subsidiary is
generally more expensive because our collective
agreements are more expensive.
Mr. Bill Casey: If you were a member of Parliament
and not the president of Air Nova and you were trying to
come up with the best answer for Canadian consumers,
wouldn't you recommend independent regionals rather than
the more expensive subsidiaries?
Mr. Joseph Randell: That's probably why I'm not a
member of Parliament.
Some hon. members: Oh, oh!
Mr. Joseph Randell: Yes.
Mr. Bill Casey: Another thing that concerns me
is that you don't mention Canadian Airlines
regionals. They're going to be part of
this big new monopoly here, and the regionals at Canadian
Airlines are just as important as the regionals at Air
Also, Canadian Airlines has some
independent regionals. I don't know if Air Canada has
any. Yes, they do have independent regionals.
There's a whole group of people who aren't in your
discussions or projections of what's going to
Where do you see the Canadian Airlines
group fitting into this picture? There's no
mention of them here.
Mr. Joseph Randell: There is a mention
in that Canadian Regional, which is a wholly owned
subsidiary of Canadian Airlines, is part of the Air
Canada proposal. That is included in here.
issue of the regionals in the east that are not owned
by Air Canada or InterCanadian,
there are other options to pursue. The
experience has been a significant amount of financial
difficulty in eastern Canada. Air Atlantic was
shut down, for instance, and replaced by
InterCanadian. It's my understanding that these
financial difficulties continue.
While I sympathize with their financial difficulties,
we have competed aggressively, long and hard, in these
regional markets in building a very high-quality
product. Frankly, representing the Air Canada
regionals and the value for the shareholder, I really
believe that for us and our employees to be asked to
give over a significant amount of our business and what
we've built up is unfair.
Mr. Bill Casey: It also doesn't sound very fair in
that if Air Canada is proposing to merge these two, to
treat the Canadian Airlines people and company as if
they are the enemy still doesn't make it sound as if
the Canadian Airlines group is going to get very good
treatment. That's the impression I draw from what
Mr. Joseph Randell: You're speaking of the non-owned
Mr. Bill Casey: Yes, and perhaps even of the owned
ones. Your allegiances are definitely towards Air
Canada and the Air Canada employees, but if this is a
merger that's supposed to see you hand in hand,
tiptoeing through the tulips together, it doesn't sound
as if it's going to be very fair.
Mr. Joseph Randell: Mr. Casey, my allegiance is to
the Air Canada regional employees, very clearly. As
Air Canada regionals, we recognize that we have some
problems out west. We have built very strong market
share in eastern Canada, at 75% or 80%. We are
higher-cost, and if we are going to allow for others
and independent regionals and give them access to this
one large carrier, it will potentially have a very
negative effect on the Air Canada regionals.
Mr. Bill Casey: So you advocate total control,
total access, while eliminating everybody else from
access to the dominant carrier?
Mr. Joseph Randell: When you
look at the world and at
major carriers and the relationships they have
with their feeder companies, I can think of no case
where there is not exclusivity—none.
The Chair: Thanks, Mr. Casey.
Mr. Joe Comuzzi (Thunder Bay—Superior North, Lib.):
I have a question, Mr. Chairman.
In order that we don't leave this room not clear about
the role of the airlines you operate, you are a
wholly owned subsidiary of Air Canada.
Mr. Joseph Randell: That's correct.
Mr. Joe Comuzzi: The directors of your three
companies, Air Ontario, Air Nova, and Air BC,
are under the direction of Air Canada.
Mr. Joseph Randell: Air Canada owns the company, and
the shareholders have the fiduciary responsibility to
guide management and to guide the company, that's
Mr. Joe Comuzzi: I don't know why you would have a
board of directors for Air Canada and a board of
directors for the three other airlines, but those
directors on the three other airlines from the dominant
airline are appointed by the management of Air Canada,
Mr. Joseph Randell: That's correct, yes.
Mr. Joe Comuzzi: You're just wholly owned.
There's no franchising. There's no independence. At
an operational level, you run your companies, but you do
not do that outside the parameters as set down by Air
Canada. Is that correct?
Mr. Joseph Randell: That's correct.
Mr. Joe Comuzzi: If tomorrow morning, Mr. Randell,
you said, “Jeepers! We're having trouble out west.
I think I'm going to go with Canadian Airlines. I'm
going to feed Canadian Airlines until January”, that
ain't going to be done, is it?
Mr. Joseph Randell: No.
Mr. Joe Comuzzi: So you're part of the Air
Mr. Joseph Randell: Yes.
Mr. Joe Comuzzi: Thank you.
The Chair: Mr. Bailey, please.
Mr. Roy Bailey (Souris—Moose Mountain, Ref.):
Thank you, Mr. Chairman.
I'm having some real problems here, Mr. Randell,
but not because I didn't get much rest last night
or because I'm an owly person.
I really suspect there's some contradiction within
your presentation. On page 3, in the second-last
paragraph from the bottom, I read, “The Regionals
strongly support Air Canada's plan for restructuring.”
Of course you're referring to the regionals that
are owned and controlled by Air Canada, is that
Mr. Joseph Randell: I can only speak for the
companies I manage, yes.
Mr. Roy Bailey: All right. If you strongly
support—and I'm not denying that you do—Air Canada's
plan for restructuring, we'll keep that point in mind
as we turn over to the second paragraph at the top of
page 4. It says, “Should a sale of the Regionals
ever be contemplated, we agree with Air
Canada”—that's Mr. Milton now—“that any sale
must be conducted in a proper and orderly basis”.
Mr. Joseph Randell: Yes.
Mr. Roy Bailey: Then it seems to me we have a
conflict here, in that I see your
boss's proposal right now—what you might say is a
takeover of Canadian as such—as anything but proper
and orderly. On one hand you're saying this should
take place. I'm having real difficulty there, Mr.
Randell, because the regionals—and we in the west rely
very much on the regionals—are every bit as important
to the operation of Canadian, as we know it today, as
they are to Air Canada. The only real difference
is that we have the entry in western Canada of
WestJet and so on.
You are assuming in this restructuring that the
regionals of Air Canada will be taking over Canadian
Mr. Joseph Randell: No.
Mr. Roy Bailey: What are you going to do with the
other regionals in this restructuring program?
Mr. Joseph Randell: It's my understanding that we do
have significant issues in the west with regard to
overcapacity and the economics of the regional services
that are in the west. We now have three
operations in the west. We have Canadian Regional
and Air BC, along with WestJet. As a
result of this proposal, there would be a
rationalization of the services between Canadian
Regional and Air BC, such that capacity would be
changed, perhaps redeployed, or perhaps new markets
would be entered into in combination. But
you would still have these two regionals operating in
the west as separate companies.
In the east, we're suggesting that Air Nova and
Air Ontario, being wholly owned regionals, are the
best, and in an owned environment, we need to have
exclusivity with regard to feeding Air Canada and the
new merged carrier.
Mr. Roy Bailey: Then let me get the picture here.
We're going to have this restructuring, and through
restructuring they'll have the regionals for Air Canada
and they'll have the regionals we know now, which
are those of Canadian. What in the world are we going
to do when we have three or four different regionals
all controlled by Air Canada in the restructuring? I
just think that's very bad news for Canada.
Mr. Joseph Randell: All I can tell you is the
relationship between regionals and the main line and the
feed that exists is in all cases exclusive
in terms of the carriers. You don't have carriers
competing together to feed a main-line carrier. I know
of no example in the world where that works or even
exists. In Canada this situation is created by the
fact that we would have one airline.
To believe we can
separate the regionals and have competition amongst the
regionals in terms of who feeds that airline is
completely foreign to our business.
It will create all sorts of issues related to ownership
versus non-ownership, and could cause some changes in
There are issues related to customers. If you have an
Air Canada ticket, which counter do you go to? Where
do you arrive at the airport? Actually, there could be
two carriers leaving side by side at the same,
connecting to the same flights.
So I don't
think we're creating the type of competition we
really need. As long as these customers
have access to that network at a reasonable price and
charge, the same as on the main line,
that's our mandate.
The Chair: Thanks, Mr. Bailey.
Colleagues, we have to move on to our next witness,
but I have four people who have asked for one question
each: Guimond, Meredith, Desjarlais, and
Mr. Michel Guimond: Mr. Randell, I have a relatively simple
question about the language issue. Ms. Dyane Adam, the Commissioner
of Official Languages, has testified before this committee and this
morning, we heard from representatives of the Association des gens
de l'air du Québec. Both witnesses stressed the same point, namely
that Canada's Official Languages Act must apply to regional
carriers in deference to the 1.5 million francophones outsides
Quebec who are airline users. The Maritimes are home to many
francophones, including the Acadians of New Brunswick, Nova Scotia
and Prince Edward Island.
I'd like you to tell me clearly, yes or no, if you agree with
the Commissioner of Official Languages that the provisions of the
Official Languages Act should also apply to regional carriers
operating in our bilingual nation—a nation from which we wish to
separate, although that's not the issue here.
Mr. Joseph Randell: First of all, three
regional carriers operate across the country. In
the case of Air Nova and Air Alliance, we very
clearly operate within the intent and spirit of the
Official Languages Act. It makes good
business sense, it is important from a safety
point of view, and it certainly is vital given the
number of francophone customers we have in these
marketplaces. If we don't do that, we are not being
responsive and responsible in the marketplace.
We have had very few complaints. We differ with
the official languages commissioner for
a couple of very good reasons. First, if you look
at the complaints that have come forward to the
official languages commissioner, in my view some of
those complaints have been driven by small newspapers
in places such as Prince Edward Island. They
about the amount of French advertising that may occur
in their newspapers, and they are driven by their own
limited interests. In terms of the true complaints
that come from customers about not being served in the
official language of their choice, our number is less
than one complaint per 100,000 passengers, which
is very good.
With regard to Air Ontario and Air BC, these
carriers went from being independent regional carriers
to becoming wholly owned subsidiaries of Air Canada. As
such, they operate primarily in markets where there is
limited demand for service in both official languages.
However, while flight attendants are not totally
bilingual, through on-board announcements,
safety announcements, etc., we certainly do respect the
requirement that we must provide service in both
In terms of being totally in compliance, we are not.
With the issues that would create from a cost
and also from a labour point of view, the implications
of applying that act would be huge.
The Chair: Thanks, Mr. Randell.
Ms. Val Meredith: Thanks.
Mr. Randell, I want to deal with a comment you make
on page 3:
Together with Canadian Regional, we will optimize our
schedules where surplus capacity exists. And our
employees have been given assurances of job security,
so important during times of uncertainty.
From what you were saying earlier, Canadian Regional
carriers are only going to be in western Canada, as I
understand it. Air Canada carriers want the
exclusivity in eastern Canada.
So my question to you
is, where is the job security and where are the job
assurances for the Canadian Regional
pilots, employees, and staff in eastern Canada? When
you say, “Our employees have been given assurances of
job security”, does that include Canadian Regional
employees' jobs as well as Air Canada regionals?
Mr. Joseph Randell: That includes the employees of
Canadian Regional Airlines in western Canada, yes.
Ms. Val Meredith: So only in western Canada.
Mr. Joseph Randell: In the east, there is not an
ownership relationship. In the east, InterCanadian
operates under a licence, as does Air Georgia, and
they're in a
business relationship with Canadian Airlines. So these
employees are not employees, either directly or through
subsidiaries, of the owned company in this case.
Ms. Val Meredith: So it's only western Canadian
employees who are protected.
Mr. Joseph Randell: And the employees of Air Nova and
Air Ontario, that's correct.
Ms. Val Meredith: Okay, thank you.
The Chair: Thank you, Val.
Ms. Bev Desjarlais: I'll follow on Mr. Guimond's
questioning on the language issue.
We all have come to recognize that flight attendants
aren't just waitresses out there; they perform a very
important safety function. On your Beech 1900 that
operates, as you said, mostly in Quebec, you don't have
any flight attendants on that flight. Who looks after
the safety issue?
Mr. Joseph Randell: The first officer and the
Ms. Bev Desjarlais: Okay, so on top of their
piloting duties, they then carry out all the duties...?
Mr. Joseph Randell: The duties associated with
briefing customers with regard to safety exits, etc.,
Ms. Bev Desjarlais: Okay, thank you.
The Chair: Thanks, Bev.
Mr. Casey, a single question.
Mr. Bill Casey: A single question.
You earlier said you don't know of anyplace that
operates independent subsidiaries that feed the
national airline. What about Air Ontario, First Air,
and InterCanadian? Those are right here in Canada, and
they have worked. They're independent, but they have
fed the national carrier. Why can't that system work?
Mr. Joseph Randell: I'm sorry; I was probably
misunderstood. I was talking about where you had
multiple carriers on the same routes serving or feeding
the one carrier. If you're independent and not owned,
you can still have a feed relationship with the major
carrier, yes. There's no reason you couldn't. Those
examples exist all over the place. As a matter of
fact, in western Canada, with CMA, that exists.
The Chair: Mr. Randell and Ms. Clark, thank you
very much for your presentation and for answering our
questions. We appreciate the time you've taken to be
here with us today.
Colleagues, we'll suspend for two minutes only so that
we can change the witnesses and move on quickly,
because we do have a vote at 5:30.
The Chair: Colleagues, we resume our hearings.
We welcome to the table Ronald Poupart, who is special
adviser to Montreal International; and Françoy
Roberge, director of public affairs and communications,
Montreal Metropolitan Chamber of Commerce. Both are
with the Montreal Airports Development Support Group.
Gentlemen, welcome to the Standing Committee on
Transport. We invite your presentation of between ten
and twelve minutes, and then we can get to some
questions. When you're comfortable, please begin.
Mr. Françoy Roberge (Director, Public Affairs and
Communications, Montreal Metropolitan Chamber of
Commerce; Montreal Airports Development Support Group):
Thank you, Mr. President.
First I would like to tell all the members of this
committee that we fully respect and appreciate the work
you are doing.
We recognize that you are an important democratic institution.
Before I begin my brief presentation, I'd like to state for
the record that we are not airline industry experts, although we do
represent the economic and political interests of Montreal, a city
that is home to a little over 10 per cent of Canada's population.
The Montreal Airports Development Support Group is a
federation of 17 partner organizations, all of which are listed in
our submission. The heads of these organizations would have liked
to be here, but unfortunately, they had other commitments, given
that this is a very busy time of the year. Most of them are very
active members of the business community. One is presently in
Hungary, while another is in the United States. Several were unable
to change their schedule in order to be here at 4:30 p.m. rather
than at 6 p.m.
The Montreal Airports Development Support Group represents
most of the major businesses in the Greater Montreal area. These
businesses employ nearly 70 per cent of the 1.7 million people that
make up the area's workforce. Our message stems from our economic
vision, namely that airport activity and air transportation are key
components of the Montreal area economy.
Metropolitan Montreal, which boasts a population of between
3.4 and 3.5 million people, also represents between 10 per cent and
11 per cent of the population of Canada. Its GDP represents over 13
per cent of the national GDP.
The Montreal area economy is driven by knowledge-based sectors
such as the aerospace, information technology and
telecommunications industries. As with Toronto, these sectors
account for nearly 22 per cent of all employment.
Montreal is also an international city. A total of 72
international agencies based in this metropolis, including major
international aviation organizations such as the ICAO, the IATA and
ATIS, employ 5,000 people. In fact, ATIS recently announced the
creation of 200 new jobs. There's no question that Montreal is an
international city, a major economic centre and a metropolis driven
by the new economy.
The airline industry is very important to us. We're here today
to speak to you, among other things, about the sharp decline in air
traffic in Montreal over the past 20 years, ever since the opening
of Mirabel airport and the institution of a two-airport system in
Montreal. This trend has been slowly reversing itself over the past
two years and we hope to continue seeing signs of a turnaround. Any
change in the structure of Canada's airline industry concerns us.
I will now call upon my colleague Ronald Poupart to talk to
you briefly about the air transport industry as such.
Mr. Ronald Poupart (Special Adviser, Montreal International,
Montreal Airports Development Support Group): In recent months,
major changes have been launched in the Canadian airline industry.
In light of these changes, the business community and Greater
Montreal wish to reaffirm the right of this major region to the
dynamic, ordered development of its air transport industry and air
Rather than seeing its airports feed hubs of other North
American carriers, Montreal wants the region to become a hub, not
necessarily as large as Toronto - the laws of the market dictate
otherwise - but a hub all the same, one that complements Toronto by
offering North American travellers a choice of connections suited
to all types of needs.
The Chair: Monsieur Poupart—
Mr. Ronald Poupart: Yes?
The Chair: You'll have to slow down a little bit
Mr. Ronald Poupart: Sorry.
The Chair: The translator is trying to keep up
with you. It makes it very difficult.
Mr. Ronald Poupart: I thought we had only ten
minutes. That's why—
The Chair: Well, you have ten minutes. You're
going to have to shorten your remarks, rather than
trying to get through a twenty-minute presentation in
ten minutes. Thank you.
Mr. Ronald Poupart: The joint Onex-American Airlines offer to
merge Canadian International and Air Canada into one corporation
with a view to streamlining air transport sparked some concerns in
We know that American Airlines is a dominant carrier in some
markets where Montreal wants to increase its presence,
specifically, Latin America and Europe.
Today, the prospect of seeing a dominant carrier emerge under
the aegis of Air Canada prompts us to urge the Canadian government
and Air Canada to do whatever is necessary to ensure that
conditions favourable to the growth of Montreal's airport activity
are maintained and improved.
The guarantees set out in Air Canada's privatization act with
respect to keeping its headquarters and aircraft and motor
maintenance base in Montreal must be maintained, as well as its
obligation to provide bilingual service to passengers.
Montreal area leaders would also like to see other Air Canada
activities remain unchanged, specifically flight plan and frequent
flyer program management. They would also like any future dominant
carrier to continue working closely with the Montreal business
community and airport authorities to develop new connections to
such destinations as Mexico, certain major North-American cities,
the Caribbean, Italy, Spain, Western and Eastern Europe, the Middle
East, North Africa and certain destinations to the Orient.
The withdrawal of the Onex offer has not changed these
fundamental issues, the importance of which we are underscoring to
the Government of Canada.
By temporarily suspending certain laws a little over three
months ago, the Canadian government, in its bid to stave off the
bankruptcy of Canadian International, whose fate still hangs in the
balance, acted somewhat hastily and, we believe, without carefully
analyzing the fundamental issues. By intimating that it was ready
to amend the section of Air Canada's privatization act prohibiting
anyone from holding more than 10 per cent of the national carrier's
stock, the Canadian government gave further credence to this
impression, while leading some to believe that it was very much in
favour of the Onex-AMR offer.
The Canadian government must address the following issues:
Should two national and international competing carriers be
maintained in Canada? To maintain this competition, is it advisable
to grant one or more carries more control over a Canadian airline?
Should we grant one or more airlines cabotage rights on the
Canadian market? Or, on the contrary, should we create a near
monopoly, to the detriment of Canadian International? Should Air
Canada be granted more international routes? Should we promote the
creation of a new discount Canadian carrier? In such a context,
should the provisions of the Air Canada privatization act be
maintained? What will be the effect of a near monopoly on service
to remote destinations? How does the Canadian government intend to
modify route assignment in the future? What will be the effect of
a near monopoly on already high airfares?
All of these questions must be debated at length, allowing
leading Canadian experts and interested parties to express their
opinions. For these reasons, the GSDAM submits that it is necessary
to convene more than this committee on transport. We are not
questioning the honesty and commitment of this committee, or the
desire of its members to serve their constituents. However, we are
asking the Canadian government, as it did during its study of the
banking industry, to form a task force consisting of leading
Canadian air transport experts from Vancouver, Toronto, Ottawa and
Montreal to participate in serious deliberations on the Canadian
airline industry and to present to the government the best
solutions in the interest of all Canadians.
After all, as the century draws to a close, air transport is
a priority for all communities in this vast and sparsely populated
country. It is a matter of public interest, just like the air
rights the Canadian government arbitrarily granted many years ago
to selected carriers. These rights belong to all Canadians.
Mr. Françoy Roberge: In regard to what we just
said, we are asking five things of the Government of
Canada, which you represent.
First, we ask you to create a task force similar to
the task force that studied the question of banks
owning, because this is a very strategic industry, like
Second, we ask you
to make sure the rights of the consumers
are protected and the service is maintained at a good
quality and reasonable price.
Thirdly, we are asking the government to carefully study the
possibility of offering non-Canadian carriers cabotage rights on
Canadian routes, which would create heated competition on the
busiest lines to the detriment of necessary but less profitable
connections to more remote communities.
Fourthly, we are asking the Canadian government to ensure that
regardless of the outcome of the current restructuring, all of the
regions of Canada, and specifically the Metropolitan Montreal
region, maintain favourable development prospects and not have to
be content with the status quo.
Lastly, we are recommending that steps be taken to ensure that
Metropolitan Montreal maintain both its dominant position as an air
service and airport centre, and its growth potential, a potential
tied to its role a player in the international air transport
The Chair: Gentlemen, thank you for your
On the heels of your comments, Mr. Poupart,
I want to assure you, sir, that our
deliberations are very serious. Unfortunately we
didn't have the luxury of time on our side, and that's
why we elected to do the work here through the Standing
Committee on Transport, and not strike a task force
that might take months to do its work.
So because of the crunch of time, it was given to us
as our responsibility to do that.
Rest assured that
having already heard, as of tonight, some 100 witnesses
representing 46 organizations in some 27 meetings, we're
taking this issue very seriously.
Ms. Val Meredith, please.
Ms. Val Meredith: Thank you, Mr. Chair.
Thank you, Mr. Roberge and Mr. Poupart, for your
I appreciate that you're here representing Montreal.
I appreciate that perhaps you feel Montreal hasn't
played a significant role as far as being a hub. But to be
quite honest with you, gentlemen, my concern is not for
Montreal but for Vancouver, because I see Vancouver,
which has earned the right to be an international hub, is
being questioned during this airline restructuring.
I have watched over the years while past federal
governments—I won't blame this federal government—have
certainly showed favouritism and protection towards
Montreal in the aerospace industry and in the Air
Canada Act, which has the only legislative
specification of where a head office has to be. I
don't think there's any other piece of legislation that
specifies where a head office has to be.
So my question to you—and it's an honest question—is
do you think Montreal can compete internationally
without the protection and favouritism shown by the
Mr. Françoy Roberge: Yes, Montreal and Vancouver can be
competitive centres because of the size of the market they serve.
Vancouver is a natural gateway to the Orient, while Montreal is
also a natural departure point for travellers heading either west
or to Europe. Canada's major hub is Toronto, perhaps in view of the
size of its market.
There are several hubs in the United States. The biggest
airlines usually concentrate passenger traffic in two, three or
four centres. The Canadian government hasn't done much to promote
Montreal's growth. For example, it has systematically denied Air
Canada access to certain routes and instead, awarded these routes,
which by right belong to all Canadians, to Canadian International.
It's not that we have anything against Canadian International. I've
frequently flown on this carrier and each time, the experience has
been very positive, but one region should not receive preferential
treatment, except when it comes to aircraft maintenance operations.
Montreal is home to a vibrant aeronautics industry and nearly 59
per cent of Canada's aeronautics industry workers are employed in
Montreal. Logically, maintenance operations should continue to be
carried out in Montreal.
Mr. Ronald Poupart: I'd just like to say that we don't really
want to compete with Vancouver. As Canada's airline industry
undergoes restructuring, our concern is with our neighbours to the
South. We're afraid of losing any advantages we have. That's what
worried us about the Onex proposal. Our airports would have become
feeders for US hubs. We all would have lost out. I think there's
room in the market for Vancouver, Toronto and Montreal, but the
interests of each centre must be safeguarded.
Ms. Val Meredith: But Vancouver doesn't lose in
that. It's an American feeder that feeds
Vancouver airport through to the Asian market.
Air Canada doesn't feed any traffic to Vancouver. It
feeds its traffic to L.A. and to San Francisco. So in
this restructuring scenario where Air Canada is
literally taking over the market, Vancouver does lose
We're not afraid of using the United
States airlines as a feeder into our Vancouver airport,
so I don't think we should be afraid of American
carriers. But we have to really look at using
the Canadian hubs, using the Canadian airports, and
maximizing their potential. I would suggest that's
something we should be looking at as a committee, rather
than feeding our airlines down into American airports.
The Chair: Thank you, Val.
Mr. Françoy Roberge: We're not airline industry experts, but
we do have the impression that combined American Airlines-Canadian
activity has transformed airports in Western Canada, particularly
the Vancouver one, into feeders for US hubs. The US carrier is the
dominant player in this region when it comes to transborder
flights. Perhaps that's because it has more resources and
equipment, but we don't think this experience has necessarily
benefitted Vancouver. Perhaps there are better options for
The Chair: Mr. Sekora, please.
Mr. Lou Sekora: I'm here as an MP for all of
Canada, not for a certain part. I'm going for
pricing on airlines, service, and employees. I
can tell you that if some airline is good
for the east and bad for the west, it gets no attention
of mine whatsoever. Nor does some airline that's good
for the west and not good for the east. I want something
that's going to be good across Canada.
To me, what's scary about Air
Canada is that they feed everybody to
Asia and the Pacific Rim through Los
Angeles. They don't have a hub in any city in Canada
where they feed. It's Star Alliance, and
that's where it goes. The headquarters are in
So if there were the one airline and Oneworld
were gone, there certainly would be no connections from
Vancouver to Asia or anywhere else. That's where the
west would lose.
We have to be very careful.
I'm saying this very strongly, because
we seem to be very good at
having certain people, from the east
to the west, pit each other against each other for some
reason. Dammit! We're all Canadians. We're all one.
We're Canada. We're not something where it's, “I am
sorry. I am from Quebec, so I'm not Canadian. I am
from somewhere else.”
I remember being in Quebec—
The Chair: Question, Lou.
Mr. Lou Sekora: Okay.
I would hope
we are here today to do what's best for Canada and not
pit ourselves against each other, because, boy, I'll
tell you, you get my back up awful fast when you start
pitting one against the other or drawing these
flowery pictures or airy-fairy pictures that
are not of any value
That's all I have to say.
The Chair: Thank you, Lou.
Mr. Lou Sekora: Thank you. I'm glad you called me
The Chair: You're lucky I called you at all.
Mr. Lou Sekora: I might have gotten madder if
you'd called me five minutes from now.
The Chair: Good. I'm glad we worked that
Mr. Michel Guimond: Thank you, sirs, and congratulations on an
excellent presentation. As representatives of the busiest airport
in the country, I think it was quite natural for you to appear
before the committee at this time, all the more so given the
importance of the aeronautics industry to Montreal's airport and to
I don't want to get into a partisan debate over this, but it
should be recalled that before Air Canada was privatized, the
corporation's head offices were located in Montreal. We haven't
forgotten. The head offices of VIA Rail, which was privatized by
this government, must, by law, remain in the Greater Montreal area.
Having said this, in response to the chair's comment on your
first recommendation, which called for the government to form an
independent task force, I'm intrigued by the idea. You mentioned
the study of the banking industry. The government struck an
independent task force last spring to examine the banking industry.
I for one am tempted to try and convince my colleagues that this
recommendation should be part of our report, but how should we
react when we're told that Canadian's financial situation is very
When he first testified before the committee, the President of
Canadian, Mr. Benson, told us that his company had enough money to
stay in operation another few weeks or at most, another few months.
I found that to be a very inflammatory, ill-advised statement, but
he will have to deal with his administrators and with his own
decisions. How do you react to the statement that Canadian may not
survive long enough for an independent task force to submit
Mr. Françoy Roberge: It would appear that Canadian's US
partner is actually prepared to help keep the airline in business
for some time yet. We first made this recommendation six or seven
weeks ago. We were not necessarily thinking about a task force on
the same scale as the MacKay task force, but we felt that there
should be some way of bringing together some very knowledgeable
individuals. I know that some of these individuals have presented
testimony to the committee, but there are others who could be
consulted. In Montreal, we ourselves have consulted with three
experts apart from Mr. Gaudry, who appeared before your committee.
You have already done a considerable amount of work and all of your
transcripts are available. A task force could be ready with a
report within two months' time.
We can imagine a group of independent experts, perhaps
academics, drafting a report similar to the MacKay report, one that
would be of interest to the public. No one could say that it was a
government document reflecting the position of Transport Canada or
that the position taken in the report was determined in advance. I
know the committee is doing its work honestly, but personally, I
would like to see a report by a group of independent experts, and
I think that's what we would all like to see.
Mr. Michel Guimond: Would you care to add to that, Mr.
Mr. Ronald Poupart: I'd like to respond to Mr. Sekora's
comment. We need a genuine Canadian air transport policy, one that
takes into account the concerns of consumers, of remote and
isolated regions and overall industry requirements. We need to take
the time to formulate a policy that addresses more successfully the
needs of all Canadians.
Mr. Michel Guimond: Your second recommendation...
The Chair: Thank you, Michel.
Mr. Dromisky, please.
Mr. Stan Dromisky: Thank you very much, Mr.
Your document is very interesting, but I'd like to go
to page 8, where you have your five recommendations. I
find the third suggestion very interesting, that we go
ahead with the possibility of offering non-Canadian
carriers cabotage rights.
I would like your rationale as to why you're
recommending that we do something of this nature. This
implies that you would support the possibility of
introducing cabotage rights. If that becomes a
reality, then the whole ball game changes dramatically.
It could have a tremendous impact.
For instance, it could have a very strong and negative
impact on Dorval and the aviation industry in Montreal.
If you really, truly believe in open skies, and if you
really, truly believe in competition—which the two
major airlines don't really believe in—once you get
cabotage going in, Montreal's aviation industry could
be wiped out. There's no law saying that competitors
coming from south of the border, who would be far more
powerful than anything we would ever possibly conceive
and create in the aviation industry in Canada, could
survive. So they could maybe make Winnipeg the main
hub, or they could make some other community the main
Did you think this out? Did you look in that
Mr. Françoy Roberge: Yes. In fact we asked the
government to study it very carefully, because at first
glance we were not at all favourable to immediately
I believe it was the head of Canada's Competition Bureau who
suggested that cabotage rights be granted to American carriers.
Some newspaper columnists have also started to make this
suggestion. Also, things could change in the matter of Air Canada
and Canadian International. The latter might just accept an offer
from Air Canada, with American demanding substantial compensation
in return. Ultimately, won't the Canadian government be tempted to
let Air Canada take control of Canadian, but with American Airlines
being granted cabotage rights on Canadian routes? This possibility
is worrisome to us and we want the government to carefully study
this proposal. As things now stand, it could be harmful to the
I know Mr. Poupart has a few more things he'd like to say on
Mr. Ronald Poupart: If we grant cabotage rights to the
American carriers, they would have to extend the same courtesy to
us. Judging from what's been said, even if Canadian carriers were
granted cabotage rights in the United States, unless they had the
proper airport landing slots, they wouldn't be any better off.
However, there is a very real possibility that US carriers will be
granted cabotage rights. From an economic standpoint, that could
prove dangerous. That's why we are asking the government to study
this proposal very carefully.
Mr. Stan Dromisky: Thank you very much.
The Chair: Thanks, Mr. Dromisky.
Ms. Desjarlais, please.
Ms. Bev Desjarlais: I have a couple of quick questions
You note on page 4 that IATA does not look with favour
at having two airports, such as Mirabel and Dorval,
operating so closely. Why would that be the case?
Mr. Ronald Poupart: When the Canadian government decided back
in the 1960s to build Mirabel airport, the IATA made it very clear
that such a move would threaten the harmonious development of
Montreal's airports and that a choice had to be made between the
two facilities. Unfortunately, the two airports were kept opened,
which resulted in a decline in traffic and activity, as everyone
There are many other reasons for the declining fortunes of the
Montreal airport, such as the fact that aircraft can fly longer
distances, and the more liberal regulations allowing carriers to
land anywhere in Canada.
Basically, the IATA strongly recommended that there not be two
airports servicing the Montreal area.
Mr. Françoy Roberge: According to the IATA, cities that are
bigger than Montreal, such as Toronto, New York, London and Paris,
can support two airports. In Montreal's case, the existence of two
airports hindered the growth of the air transport industry.
Ms. Bev Desjarlais: Okay.
With regard to your concerns about an independent
report by industry experts, you've indicated there
are three others in Montreal we haven't heard from, but
you've been able to listen to them. We've
heard from a number of experts in
their fields, so to speak, and from different groups
representing different stakeholders in the airline
industry. Without question—without question—almost
every group has come representing their own particular
area. Very few, if any—and let's take you, for
instance—have come before us and said,
“Because Montreal has the headquarters for Air Canada, I
think the headquarters for VIA should be somewhere
else, because we want to be fair, and we want to make
sure everybody benefits from this.”
We didn't get those kinds of proposals with regard to
the airline industry.
As a result, I'm not convinced
that, no matter how many different industry experts we
heard from, we wouldn't get this single-minded “I'm
just looking after this group” instead of experts
looking at the whole picture.
I represent a remote northern area, and
as a result, I will do my darndest to make
sure there is fair representation. I find it hard to
believe the City of Montreal is really and
genuinely concerned that I'm going to be able to ensure
there is fair service to northern Manitoba. I
just find it hard to believe.
I guess that's why I'm elected to represent that area
and Lou is here representing his area, so that we bring
that broad spectrum.
I hope we are able to take everything we've heard and
ensure that we come up with a better plan, because I
believe it's because of a lot of the industry experts
that we're in the mess we're in. They didn't do the
right things initially.
The Chair: Do you have a comment, Mr. Roberge?
Mr. Françoy Roberge: I don't know if these experts were
consulted. To my knowledge, they were not formally consulted. Our
17-member organization would have liked to see highly knowledgeable
persons working on a day-to-day basis with the airline industry to
achieve a consensus on a new long-term policy for Canada's airline
I also want you to understand that we are truly attuned to the
problems associated with service to the regions and to the
interests of Canada's various regions. We wouldn't want to see
Vancouver become a secondary airport or see any job losses in
Western Canada. We want regions like ours... Travellers to Quebec's
northern regions pay dearly for the privilege and for local
residents, the airfare is prohibitive. We are certainly mindful of
all of these considerations.
Of course, the focus of our attention is rather narrow. That's
because we are essentially a group of businesses from the Montreal
area and we are defending the interests of this particular group.
That's our job.
The Chair: Thank you, Mr. Roberge.
Mr. Calder, please.
Mr. Murray Calder
(Dufferin—Peel—Wellington—Grey, Lib.): Thank you,
Over the last few weeks I've put together
ten points that I think we have to address.
First, you were talking about cabotage. If there is
going to be cabotage, I like to refer to it now as
having to be reciprocal. That would be the only way I
would agree to that.
I wanted to ask you questions
on three points.
First, we currently have with Air Canada the
10% clause on ownership and also the 25% clause on
foreign ownership. Do you think any
changes should be made to those two clauses?
Another issue that has come up during our questioning
concerns time slots at the airports. Do you think
a policy should be put in place, once we come up
with this, to deal with that issue? I'm beginning to
see now that if an airline wants to establish a
monopoly, if they have control over the time slots at
the airport, they in fact have that monopoly.
Mr. Ronald Poupart: The government and the House of Commons
have adopted the 10 per cent ownership rule for certain sectors. We
haven't stated our position on this issue, one way or another.
That's why we're asking the experts to help us and to help
Canadians decide whether the 10 per cent rule should be maintained.
Once comparisons have been made with international laws and
some consideration has been given to what the future holds for
international alliances such as Star Alliance and Oneworld, then
we'll be in a position to see if the 10 per cent rule should be
maintained for the sake of a strong, dynamic company, one that is
prepared to contend with a range of global changes. That is why we
are urging the government to take all the time it needs to study
the matter and decide whether to maintain, or modify the 10 per
cent ownership rule.
As for time slots, unfortunately, I don't know enough about
the subject to answer your question properly. Perhaps my colleague
can give you an answer.
Mr. Françoy Roberge: I'm sorry, but I'm afraid I can't either.
Mr. Murray Calder: What about the time slot issue?
Mr. Françoy Roberge: In terms of the other
questions, I think it's clear; cabotage, oui, if
we have reciprocity, but we doubt we can even exercise
that reciprocity. For instance, if we had the right to
serve O'Hare in Chicago, I don't think we could have
time slots or physical gates or whatever.
Mr. Murray Calder: Okay.
Thank you, Mr. Chairman.
The Chair: Any further questions, colleagues?
Mr. Guimond, you have a question?
Mr. Michel Guimond: For your second recommendation, you
maintain that the Canadian government should ensure that the rights
of consumers to quality, reasonably priced service are respected.
Can an organization like the Competition Bureau act as a watchdog
and, to some extent, protect consumer rights? That's my first
Secondly, yesterday and last week, various consumers groups,
including Transport 2000 and Democracy Watch, took part in a panel
discussion. These groups have formed a coalition and are talking
about coming out with a airline passenger and user bill of rights.
In making this recommendation, are you saying that the government
should also give some thought to adopting a bill of rights?
Mr. Françoy Roberge: No. At first glance, there appears to be
many kinds of bills like this. Is one needed for every type of
costly service? No. I think the laws of the market should prevail.
The Competition Bureau does indeed have a role to play, but
the fact remains that there are several airlines in Canada and
granting US carriers cabotage rights on Canadian routes is not the
way to increase competition. The way to do that is by ensuring that
the airlines get together and adopt a reasonable fare structure.
Increasingly, regional carriers are doing just that. I don't think
they're doing it simply out of concern for making a profit or
because they are reaping incredible profits at the moment. They
must also think about renewing their fleet to operate cost-effectively
over shorter distances. This kind of transition takes
place over a period of time.
The Chair: Mr. Roberge, Mr. Poupart, thank you
very much for your presentation and for answering our
Colleagues, if the bells ring,
we're adjourned until after the vote. If the bells do
not ring, we'll resume at 6 o'clock.