Hon. David M. Collenette (Minister of Transport, Lib.)
moved that Bill C-26, an act to amend the Canada Transportation Act, the Competition Act, the Competition Tribunal Act and the Air Canada Public Participation Act and to amend another act in consequence, be read the second time and referred to a committee.
Madam Speaker, I am pleased to rise this morning to debate Bill C-26 which was introduced on February 17 as the final step in the government's action plan to restructure Canada's airline industry.
Before I get into the substance of my remarks, I want to thank my colleagues in the opposition parties for agreeing to limit debate at second reading so we can send this to committee at the end of the day at 1.30 p.m. We have agreed to certain limits of time. I know I am entitled to 40 minutes but I will try to finish in about 20.
A lot has happened in the last few months but we have now embarked upon a very exciting phase in this particular restructuring process. It is far from perfect and certainly improvements can be made, but we are now seeing the positive signs of that restructuring.
With this bill, the government is addressing the challenges arising out of a radical change in Canadian air travel: the passage from two air carriers competing for customers to a single dominant carrier with a total monopoly on certain routes. The overriding objective of this bill is, therefore, to protect consumers and communities from the effects of a monopoly and to promote competition.
As I said, much has happened since we took the step last summer. I will outline some of the things that led up to what happened last summer.
We became very concerned in the spring of last year about the financial plight of Canadian Airlines. It approached us on a couple of occasions to tell us how difficult the situation was. It officially wrote to us and asked us to find a way to bring the matter to a head. In so doing, we used section 47 of the Canada Transportation Act. Air Canada also raised this in private discussions with my officials.
I am not going to revisit the past but it was somewhat controversial. For those people who believe that the government was unsure of what it was doing from the start, all they have to do is go back and look at the statements that I and my colleague, the Minister of Industry, made on August 13 last year and read the subsequent statements to know that we had a game plan. I admit that in the game plan not every move could be anticipated. In fact, what happened in the fall was very controversial.
There was a myth that we did not know what we were doing. That was false. There was another myth that we somehow dealt the commissioner of competition out of the action. That was false. What we did was try to get private sector solutions to the problems facing Canada's airline industry and it worked. In using section 47, we did not deal the Competition Bureau out of the action. In fact, the competition commissioner was very much a part of the action. However, certain aspects of the Competition Act had to be suspended for that period.
The commissioner sent me a letter in the middle of that 90 day period with many suggestions. Subsequently, many of those suggestions were part of the policy framework that I issued last October in front of the standing committee. The commissioner of competition very much had his say in this particular exercise. In fact, the framework was the second step in the process. I asked the committees of the House and the Senate to review the framework and come up with ideas.
The committees of both the House and the Senate worked very hard. They should be congratulated for putting in many hours, many more than are normally spent in the course of deliberation. They did this because they knew that restructuring the airline industry in Canada was essential for the benefit of all Canadians. I thank my colleagues in the House and in the Senate for the work that they did.
It was encouraging to note the degree of consensus that we saw between the two committees on the key issues relating to fostering of competition and protecting the consumer. On a number of issues it was clear that once we had seen the committees' recommendations we could see the support for the initiative set out in the policy framework.
As members know, the response to the recommendations of the standing committee of the House was tabled, as is required by the rules, on February 17. I felt it was useful to table the government's official response at the same time as we brought in our bill to restructure the airline industry.
I want to focus on the link between the October policy framework, much of it rooted in the advice from the commissioner of competition, and this bill which is now before the House, Bill C-26. The policy framework outlined two overriding principles and five key areas of public concern that I first spoke of last September. The principles were that safety would not be compromised and that the Official Languages Act would apply to Air Canada or any future dominant carrier and be effectively implemented.
The five areas of concern for Canadian travellers were the areas of pricing, fostering competition, Canadian ownership and control, service to small communities and a fair treatment of employees. We also indicated that we would put in place a special review process for mergers and acquisitions in the airline industry and make the terms and conditions of approval enforceable.
When it became clear that the Air Canada offer to acquire the shares of Canadian remained the only proposal on the table, after the withdrawal Onex last fall, our attention turned to trying to see that the conditions for approval were fair, just and met the terms and conditions of the policy framework.
We allowed this transaction, the acquisition of Canadian Airlines by Air Canada, to take place based on undertakings negotiated between the commissioner of competition and Air Canada on commitments made by Air Canada to me. These details were contained in an exchange of letters between Air Canada, myself and the commissioner of competition that have been made public. Again the whole notion that we saw in some of the business press that the commissioner of competition and his staff were not involved in this process was totally false.
We are now engaged in the fourth and final step in the process. That is the legislative step. It is the most important step because it will give the statutory framework that will allow implementation of our policy and will enshrine measures to enforce the commitments and undertakings made by Air Canada to the government.
Our goals in this legislation are to enhance consumer protection and to foster competition. Our key objective is to ensure that we effectively protect consumers from any abuse by the dominant carrier. We have a number of measures in the bill to deal with a wide range of issues including monopoly pricing, conditions of carriage, market exit, official languages and monitoring.
On monopoly pricing, there is no question that there will be some routes in the country especially in smaller communities where there will only be Air Canada offering service. That is a monopoly. We have to make sure that the people in those communities are not taken advantage of. We will not tolerate price gouging. That is why we are amending the Canada Transportation Act by this legislation to ensure that the Canadian Transportation Agency has the authority and the ability to look at the prices on monopoly routes and has the power to roll them back and the power to deal very rigorously with Air Canada to protect the consumer.
The Canadian Transportation Agency can do this, not just as it is now with a complaint from a member of the public. Many people are upset about prices but they never take the time to complain. They think that somehow their complaint will not be heard. That is not true. There is a provision for complaints to be heard. What we are doing in this bill is we are saying that the Canadian Transportation Agency will have the authority on its own initiative to monitor the prices, to audit the prices much like national revenue audits taxation, audits taxpayers, to see where there are abuses. That will go a long way in giving comfort to the consumers.
Incidentally this will apply not only to passenger fares on monopoly routes but also to cargo rates on monopoly routes. Business of course will also have the advantage there.
We have also moved to some degree on what we call the conditions of carriage. This is a complementary consumer protection measure that will restore the Canadian Transportation Agency's authority to review the terms and conditions of carriage on domestic service which cover such things as compensation for lost baggage or being bumped from flights. This already exists on international services but now it has been restored to the agency for domestic services.
There has been some discussion recently about a bill of rights for passengers. I am very interested in looking at what happens in the committee and hearing the views of members of the committee. Perhaps there will be amendments offered to make sure that we give comfort to passengers that they are not going to be abused not just on pricing but on the terms of carriage, that they indeed will have quality service which is fair to all.
Obviously a lot of the onus is on the airlines themselves. If airlines do not give good service, then in the normal course of events people can go elsewhere. They can do this with charter companies; if they do not like a particular charter company they can book through some other operator. It becomes of great concern when we are going to a dominant carrier. That is why I really do look forward to some of the suggestions that will come from my colleagues on this front.
We always said that we were going to protect communities and we are going to protect communities. As is known, in the deal that was announced, Air Canada has agreed to provide and to maintain services to communities that were receiving services by Canadian Airlines for three years. That is a guarantee that smaller communities will not be left out of this particular restructuring.
What we are also doing is amending section 65 of the Canada Transportation Act to ensure that the exit provisions are toughened up. Right now the last and second last carrier can give 60 days notice before they exit but that is not good enough. We are making it 120 days. I know some people will say to make it longer but quite frankly, if we make it too long, no one will venture into a market in the first place. If they feel that the market might not work out, why would they get in if they cannot get out easily? We are saying that 120 days should do the trick in this sense.
Also we are saying in the legislation that there is an obligation by those carriers that remove service to consult with the local communities. That will be rigorously enforced.
The experience has been in the last 10 to 15 years even in the most remote communities in northern Canada that wherever a carrier withdraws, some other carrier comes in because there is always a market to be served. It could be served in other ways with smaller aircraft or with different kinds of frequencies. Our experience has been that communities always maintain their service.
There were four communities that unfortunately, because they were served by InterCanadian, got left out in the cold recently. I am pleased to note that in Stephenville service has been restored by other competitors. Air Canada has agreed to go into Charlo and provide some services. This shows that if a market is there, it has to be served and it can be served by the dominant carrier or it can be served by others coming into the field.
One thing that is very important to us in government is the Official Languages Act. We also acknowledge the necessity for consumers to be served by the national carrier in both official languages.
For this reason, we are proposing to amend the Air Canada Public Participation Act, in order to make it responsible for ensuring that services provided to its customers by the carriers in its group, both present and future, comply with the Official Languages Act.
Air services provided by the regional carriers in its group operating in eastern Canada should comply immediately after this bill is passed. Subsidiaries in the rest of the country will have a year to meet requirements.
Canadian Airline Internationals Ltd. would have three years to comply, from the time they became a subsidiary of Air Canada, with the possibility of a one year extension determined later on a case-by-case basis.
However, when Canadian Airline Internationals Ltd. replaces Air Canada or one of its affiliates on a route, they would be required to comply as if Air Canada were continuing to supply the service.
On monitoring, it is not good enough just to bring in the law and make the changes that we are proposing today; all of the measures here have to be surveyed. The consumer has to be protected. We have to make sure there is some oversight. That is why I will shortly be naming a very prominent person to oversee the behaviour of the carriers, to make sure that consumers are protected, to look at how the agency is handling the changes and indeed the Competition Bureau and Transport Canada to make sure that all of this restructuring goes as smoothly as possible.
The second goal of the bill is to foster competition. We are doing this in a number of ways. I will not relay all of the undertakings Air Canada has made to the commissioner of competition and to the government. However, these undertakings are indeed very important to foster competition: surrendering slots at airports and facilities at airports; the selling of surplus aircraft to other Canadian operators; to put Canadian Regional Airlines up for sale, and that evaluation is now ongoing; to provide access to frequent flyer programs; to provide access to interlining and joint fare agreements.
In other words if they are not part of the Air Canada empire, take First Air for example, they can book from Iqaluit to Los Angeles through Montreal then on to Air Canada. There is no discrimination. They get the full benefit.
People do not understand that interlining allows for every single carrier, whether it is First Air, Bearskin, or any of these carriers, to feed in to the Air Canada network. They may not get the frequent flyer points unless they make a deal with Air Canada and agree to purchase them, but certainly it shows a seamlessness of service so that there is no discrimination, especially against smaller communities. It is okay for people like me who live in Toronto. Those of us in big cities have access, but smaller communities need to know that this interlining will give this. And as my colleague from up the valley has said, Pem Air is one of those carriers.
These are very important measures. We are also proposing to change, by the deal that the bureau made, the way that override commissions are paid to travel agents. There are also measures for Air Canada to refrain from starting a discount air operation in eastern Canada for a specified period of time.
Failure to comply with any of the undertakings made under this particular agreement with the commissioner is subject to very severe fines and imprisonment. Some people say we are being too hard, but those penalties are in the Competition Act now. If they are good enough for any other business person in Canada, they have to be good enough for the people who run Air Canada and the airline industry.
That certainly will help a lot to foster competition, but there are other means. The commissioner has called for very strict measures on predatory pricing. Quite frankly I wonder why we have not done this before. When I say we, I mean the collective we of governments in the past. We might not have been in this situation today.
We have to make sure that predatory behaviour in air services is properly identified, monitored and that actions are taken against it, so that we do not see Air Canada, the dominant carrier, drive the WestJets and others into bankruptcy by the use of predatory pricing. This bill will give the commissioner of competition the power to issue temporary cease and desist orders where he sees cases of predatory behaviour in the airline industry. That is very significant in protecting consumers and promoting competition.
It seems that just about everyone in the business schools and business newspapers says that the only way we are going to get competition in the airline industry now is to let the Americans in, to have reciprocal cabotage; let United Airlines with its 1,100 planes, American with its 900 planes, Delta and US Air with hundreds of planes, come in and provide the competition. They say that would be great for Canadian consumers.
What would that do if we did that right now? Air Canada would go down the tubes. We have not gone through all the heartache with Canadian Airlines over the last 10 years to now wash Air Canada down the drain. We have to give Air Canada the chance to establish itself. It is now the 10th world airline in terms of size. We have to give Air Canada the ability to compete.
One airline industry analyst, Mr. Jacques Kavafian, who is often quoted and is one of the few people I read, actually knew what he was talking about. He said that if the American carriers applied 3% of their capacity to the Canadian market, Air Canada would be gone within six months to one year. We are not going to allow that.
For all those people who say that we have to let the Americans in because that is the only way we are going to get competition, what are they saying about Canadian businesses? What are they saying about Canadian entrepreneurs? The government has faith that Canadian entrepreneurs will come forward and provide the service.
I could speak longer under the rules and there are a lot of other things I want to talk about, especially about how we have helped travel agents and other measures for the protection of the consumer.
I want to talk about the fair treatment of employees, because one of the five principles that we had to make sure of was that employees were protected in the best way possible. The way we have done that is to entrench certain commitments in this law. Air Canada is making commitments to employees that no more than 2,500 will be let go over the two year period, and not for two years, and then only by attrition or by negotiated packages. I assume that Air Canada will come forward with packages.
According to the newspaper this morning, a deal has been made with the CAW, the two bargaining units for Air Canada and Canadian, which is good. Pilots have made a deal and it is to be hoped there will also be a deal with the flight attendants and others.
We have made Air Canada commit to the protection of their unionized employees. There is to be no forced relocation or involuntary layoffs of employees of Canadian Airlines or their wholly owned subsidiaries for a period of two years. It appears that the airline is doing its best to meet those commitments.
I hope that hon. members will forgive me if I use a bit of hyperbole. This was a tough file. I have had a lot of tough files in my political career, but this was really tough. I think it was an accomplishment for the government. This government has had a lot of accomplishments, but this was an accomplishment because in no other country the size of Canada, a member of the G-7, a wealthy country with 30 million people, has a country been able to take the number one airline and the number two airline and put them together with minimum disruption to service, no loss of jobs, no bankruptcy and not a nickel in subsidy or bail out by the taxpayers. I say that is an accomplishment and we should be proud of that accomplishment.
I hope that when the bill is finally passed and given royal assent it will be seen as a landmark piece of legislation that will give us stability in the sky. It has given Air Canada the underpinning it needs to compete with the biggest and the best in the world. Everybody will know that the Canadian airline industry is in good shape.
Subtopic: Canada Transportation Act