44th Parl. 1st Sess.
April 20, 2023 10:00AM
- Apr/20/23 10:24:44 a.m.
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Mr. Speaker, I am truly pleased to rise in the House today and say a few words about the aerospace report that was tabled by the Standing Committee on Industry and Technology. I should say “finally” tabled, considering that we have been calling for a study of this key sector for years.
Since I was elected about three and a half years ago, I have often risen here in the House to ask that Canada develop a promising, coherent strategy that would allow our industry to reach its full potential.
Better late than never, I guess. Not long ago, when I brought the matter to the attention of my colleagues opposite, I was told that air sector support programs had been launched. This was the response I often got during the pandemic. I am delighted to see that some progress has been made. At least they know what aerospace means now. Someone got out a dictionary and looked up “aerospace”. If nothing else, it is a start. That is worth celebrating.
I remember one time when I was replacing my colleague from Joliette at the Standing Committee on Finance, which was hearing witnesses from the aerospace sector. The government officials asking questions said they had wanted to help Air Canada. The only problem is that Air Canada is not part of the aerospace sector. That is a different cluster, a different sector. At least someone opened a dictionary—I am not sure which—and now they understand what it is.
Now, thanks to the work of the Bloc—and, more specifically, our representative on the Standing Committee on Industry and Technology, the member for Abitibi-Témiscamingue—we can say this matter was addressed in a study. Finally, the sector was able to make itself heard. Finally, there is an official report that advocates for an aerospace strategy. I urge the government to follow its recommendations so that Canada is no longer the only country with a major aerospace industry without a strategy to support its development. I would even go as far as to beg the government to take that step.
Our efforts are paying off here. In fact, they are probably behind the 2021 announcement that the minister referred to a few minutes ago. Indeed, it is an excellent announcement that we welcomed. We are not opposed to virtue. However, without our constant demands, would the Prime Minister have gone to Quebec to announce that Ottawa was going to invest up to $440 million to support innovative projects in the aerospace industry? I have my doubts. I must point out that he knew he would call the election a few months later, but that is another story.
Just in passing, Quebec has had an aerospace policy for 20 years now. These investments that have been announced are significant, and we welcomed them, but it is not a strategic policy or a comprehensive vision. Despite this progress, for now, Canada still lags behind, unfortunately. However, there is an important hub in Canada. It is the third-largest aerospace hub in the world, after Seattle and Toulouse. Indeed, greater Montreal is one of the rare locations able to design and supply all components of an aircraft from A to Z, in addition to making it fly and certifying it.
When he was the federal industry minister, Jean Lapierre said, “the aerospace industry is to Quebec what the automobile industry is to Ontario”, and that is true. It is even rooted in our history. The first glider to take flight in Canada was designed and piloted in Montreal by a 14-year-old teenager, Lawrence Lesh.
In 1907, he achieved what was then the longest gliding flight in the history of aviation. In 1911, 112 years ago, the first airplane designed in Quebec was developed by Percival Reid in a garage on Sainte-Catherine Street, in Montreal.
Today, Quebec's aerospace industry represents $18 billion in sales. That is 12% of our manufacturing exports. The sector represents 40,000 direct and 100,000 indirect jobs. It includes 220 companies, of which 200 are small and medium-sized businesses. My colleague from Beauport—Limoilou asked a question earlier, and said that these were not only large companies. Indeed, there are also small and medium-sized businesses. When we consider things in purely numerical terms, instead of by weight, 200 out of the 220 companies in Quebec are small and medium-sized businesses.
These companies are a source of great pride; they are innovative success stories at the forefront of research. In all, 70% of the sector's research and development in Canada is done in Quebec. Need I remind the House that the greenest commercial aircraft in the world, the Airbus A220, was created in Quebec? Unfortunately, it has been sold, but the plane was created in Quebec.
As I was pointing out, this sector certainly does not owe its success to the vision of Ottawa and successive governments.
In fact, since this report was produced and the subsequent announcement made, the government has squandered several opportunities to demonstrate that it is serious about supporting this industry. Apart from a pre-election announcement, nothing has happened. There have been endless missed opportunities since then.
Let us not forget that we are still waiting to see Ottawa take action to help position Quebec as a leader in aircraft recycling. We have been asking. The machinists' union sent a press release about this in the fall of 2021. The election was over, and it fell on deaf ears. The Bloc Québécois relayed the request because we supported it.
Our efforts and the times that the various aerospace groups have tried to engage with the government must not be in vain. North America has the largest aircraft graveyards in the world, and there is a market there. According to the specialized firm Cirium, more than 21,600 commercial aircraft will be permanently retired by 2039. This is an incredible economic and environmental opportunity that we must take advantage of.
Quebec has the expertise to become one of the main North American hubs for aircraft storage and recycling. It is home to the only two companies in Canada that specialize in that area. The development of such centres in Quebec would be perfectly in line with the necessary transition to a green economy, not only in terms of the reuse of used parts, which is very important, but also in terms of preventing soil contamination with toxic fluids and metals from the aircraft. The government needs to walk the talk.
The government has turned a deaf ear to the industry's calls to change the luxury tax. We saw that in the budget we voted on yesterday. That decision will cost 2,000 good jobs in Quebec and will have a major negative impact, especially when our manufacturers are already dealing with cancelled orders because our competitors do not have to deal with this type of tax. Worse yet, there are a number of states that are even offering incentives while our government is imposing punitive measures with respect to our aircraft. By stubbornly insisting on going forward with this tax, the government is encouraging buyers to purchase aircraft from non-Canadian, non-Quebec sellers and to even register the aircraft and have their maintenance done outside Quebec. Meanwhile they continue flying in Canadian airspace.
Anyone who read today's La Presse is aware of this scandal: Canada is currently considering purchasing a fleet of military surveillance aircraft, specifically 16 P‑8 Poseidon aircraft and related equipment from U.S. giant Boeing, without a call for tenders. A contract worth at least $5 billion is at stake. Bombardier had, however, expressed interest in providing its own aircraft as a potential replacement for the Auroras and had made a number of representations before various ministers, in vain.
Let us talk about Boeing's P‑8A Poseidon aircraft, which Canada is looking at purchasing. A report from the U.S. government revealed that the aircraft has failed in recent years due to sitting too long in a workshop. The Poseidon availability rate, which corresponds to the percentage of aircraft that are capable of performing missions, fluctuated between 53% and 70% between October 2018 and March 2020, which is quite low compared to the U.S. military requirement of 80% performance.
Such a scenario would be an absolute betrayal of the aerospace industry in Quebec. Offering that kind of untendered contract to an American company for planes that would fail to meet maintenance standards when we have a local company just asking for a chance to promote its planes, which are built in this country, by participating in an open competition is outrageous.
Therefore, I am pleased that the report has been tabled, and hope it will help wake some people up.
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- Apr/20/23 11:21:55 a.m.
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Mr. Speaker, I am pleased to rise today to share a few comments on the report entitled “Development and Support of the Aerospace Industry”, tabled by the Standing Committee on Industry and Technology of which I am a part. However, I will note that I did not participate actively in this study. That said, I cannot outline enough how important the aerospace industry is to the Fraser Valley, my riding of Mission—Matsqui—Fraser Canyon, the neighbouring riding of Abbotsford and all other areas in British Columbia.
We are in a changing global context where the needs of the Canadian military are expanding, both for national security and for natural disasters. In the Fraser Valley, when the great floods came in the last couple of years, we had to rely on the Royal Canadian Air Force to help our constituents and to fly in supplies. Helicopters from Vancouver Island based out of Esquimalt came to rescue people in my riding. Also, the threats that Canada faces from Russia in our far north are growing. Just recently, two spy balloons that originated from China came into Canadian aerospace. The need for the government to act and do more is essential at this stage right now.
I will note three particular recommendations that came out of this report that are worth mentioning today.
The first one, recommendation 3, is “That the Government of Canada accommodate the needs of the various air fleets, particularly with regard to the maintenance of their aircraft, and support the development of companies specializing in the maintenance of these aircraft.”
Second, recommendation 5 in the report, is “That the Government of Canada, following consultation with industrial partners and labour representatives, develop a national strategy for its aerospace sector.”
Third, recommendation 7, is “That the Government of Canada collaborate with provinces and territories to fund post-secondary training across all sectors of the aerospace industry adequately accessible over all of Canada.”
In British Columbia, there are a number of big companies that have a national and global impact. We could talk about KF Aerospace in Kelowna, Conair in Abbotsford and Cascade Aerospace, which employs hundreds of people in my constituency. It is an operating unit of IMP Aerospace & Defence, which was ranked Canada's number one defence company in 2017.
The IMP group is one of Canada's best-managed companies and it has its head office located in Halifax. Its aerospace defence and aviation sectors provide comprehensive in-service support, repair and engineering. It accounts for over 3,500 jobs across Canada. There are approximately 550 of those jobs in Abbotsford at this time.
The division of IMP in Cascade Aerospace is approved by Transport Canada for maintenance, manufacturing, training and design. It is an FAA-approved company and is accredited with the Department of National Defence for maintenance, material support and technical organizations. It is one of only two Lockheed Martin-approved C-130J heavy maintenance centres and one of 13 approved C-130 service centres. To say that this company has a lot of specialties is an understatement.
Right now, Cascade is providing military support not only to the RCAF and the USAF, but it also provides support to Mexico, Tunisia, Thailand, Taiwan, Bangladesh, Indonesia, UPS, WestJet, Alaska Airlines, Southwest Airlines and Longview Aviation. Cascade has that specialization in IMP for maintenance repair and the overhaul of aircraft as an accredited manufacturing facility for a various suite of aircraft types. To put it bluntly, as I mentioned earlier, in the changing global landscape that we find ourselves today, facilities like Cascade Aerospace are not only good for our economy, they are essential to Canada's national interest to maintain a robust aviation sector both for commercial and defence purposes.
That said, in conversations with employees and the executive team at Cascade Aerospace, there are ways we can improve its ability to do business, to serve the Canadian and U.S. militaries, in particular, and to provide the types of jobs that Canadians want, which are high-skilled jobs in the trades that are very technical and specialized.
In the conversations with those at Cascade, they mentioned that Transport Canada could do a better job of responding to applications for design-approval delegation. It could also do better with certifications to make sure there is a more consistent approach. They mentioned that there are regulatory gaps in certification authority for military export. Design audits, in their minds, are sometimes ineffective, and regulations, in some cases, are very dated. One specific example is that the training book for new technicians still includes a section on cloth aircraft. We are working with a company that deals with the most modern technology in the 21st century, but we are still training young technicians on the repair of cloth aircraft.
One of the big regulatory gaps that Cascade Aerospace outlined is the need to recognize foreign credentials. As I mentioned earlier, Cascade Aerospace serves the United States Air Force, the Mexican air force and the Bangladesh Air Force. Sometimes technicians from those countries might even immigrate to Canada, but Transport Canada regulations would prohibit an aircraft technician trained in Mexico from necessarily being able to work right away in the same capacity as a technician trained in Canada, even though they were working on the very same aircraft in their home country.
I would encourage Transport Canada to continue working closely with Cascade Aerospace and the entire aerospace sector, across Canada, to make sure that our regulations are up to date. Right now, as has been told to me by the national association, Canada lags behind the FAA regulations. If there is one country that we want to be aligned with, both for businesses and military strategic purposes, it is the United States of America. My plea today to the government is to get those regulations updated as soon as possible.
The second big area that needs to be addressed, which is reflected in the three points I raised at the beginning of my speech, is the challenges we face in the labour market. Cascade Aerospace has been innovative in its approach to not only retain but also train the best Canadian workers possible. It is interested in hiring more indigenous people from our local first nations and more women to the trade sector. It has made lots of investments and has taken many steps to ensure that it has an in-house training program to make sure its technicians are the most competent and capable to compete at the global level for defence and other contracts.
Right now, though, the Province of British Columbia has to work more closely with companies such as Cascade Aerospace to ensure that their competency-based, hands-on training programs recognize the needs of the sector and are aligned with labour market regulations and certification programs, both through the Red Seal and labour programs at the provincial and federal levels.
To conclude, we have a lot of work to do in the aerospace sector. I am very proud to live in a community where there are hundreds of people employed in high-paying jobs in the aerospace sector. We need to work with these companies to not only meet the global challenges we are facing today, but also meet the labour challenges we are facing in communities across our country.
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- Apr/20/23 12:21:47 p.m.
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Madam Speaker, I am pleased to address the issue of the aerospace and aviation industry. I grew up in Montreal, and my family and I were always aware of the existence of this industry, particularly when we went down what was then called Laurentien Boulevard in Cartierville. There was even an airport attached to the Canadair plant.
Now it has become a residential area, but it was very impressive to go by that plant. In fact, I believe that, today, it is by far the biggest manufacturing plant in Montreal. My father worked for Canadair after the war, in the 1950s, when Canadair specialized in manufacturing aircraft for putting out forest fires. I have always been aware of the aerospace industry.
However, I am rather confused as to why the decision was made to discuss this report now. If I am not mistaken, this report is over a year old and the government has already issued a response to it, as it is required to do when a committee report is tabled. It is my understanding that we are supposed to be debating Bill C‑27, which deals with some issues that are very important at present.
The purpose of this bill to modernize our privacy protection laws in a context where we are increasingly seeing the danger of the spread of disinformation. It is a growing and current challenge that threatens the very foundation of democracy. Bill C‑27 is timely. I think it addresses rather crucial issues for our society.
That being said, I would like to turn to the subject at hand, which is the aviation and aerospace industry.
In Montreal, this industry has a long and extraordinary history. It goes back nearly a century. Montreal in particular played a key role in the Second World War. I have before me an article from the Hamilton Spectator dated September 7, 1939. I will read a few paragraphs from this article. It will become clear that Canada and Quebec, but especially Montreal, were instrumental in the war effort in Europe. This article is from New York.
A sharp expansion in Canadian airplane manufacture is expected as a result of President Roosevelt’s proclamation of the United States Neutrality Act, the New York Herald-Tribune says today....
The neutrality proclamation has cut off for the time being at least the delivery of nearly half of the 600 warplanes ordered in the United States by France, Great Britain and Australia.
“The embargo proclamation, however, does not interfere with the manufacture of similar planes in Canada under licences already obtained by the Dominion's manufacturers from American firms,” the dispatch says.
Basically, what was happening was that the United States was not allowed to export fully built airplanes to Europe to help with the war effort, but it was not prohibited from sending parts to Canada and having Canadian manufacturers manufacture the planes and send them over to Europe.
There were two important manufacturers in Montreal that were doing this manufacturing for overseas markets. One was Vickers, which, as I understand, later became Canadair, and the other was Fairchild Aircraft, which I believe was located on the South Shore, in the riding of Longueuil—Saint-Hubert, which became, after that, United Aircraft, and then Pratt & Whitney.
Another Montreal company was involved in this wartime production, and that was the Canadian Car and Foundry Company. That company was founded in 1909. It was given a contract to produce Hurricane aircraft. By 1943, the company had a workforce of 4,500 people, half of them women, I might add, and had built 1,400 aircraft, about 10% of all the Hurricanes built worldwide.
I would like to take a moment to mention the company's chief engineer, a woman by the name of Elsie MacGill. Let me tell members a bit about Elsie MacGill. She was known as the “Queen of the Hurricanes”, and she was the world's first woman to earn an aeronautical engineering degree and the first woman in Canada to receive a bachelor's degree in electrical engineering. She worked as an aeronautical engineer during World War II and did much to make Canada a powerhouse of aircraft construction during her years at the Canadian Car and Foundry.
We can see, very clearly, that Montreal and Quebec and Canada played an extraordinarily large role in the development of aerospace and aeronautics. Montreal is the home of IATA, the International Air Transport Association, which governs procedures, rules and regulations around commercial transport in the world. It is an international organization.
I would also like to mention that Dorval Airport basically started as part of the war effort that saw planes built in Montreal and other parts of Canada and shipped over to Europe. Dorval Airport, now known as Pierre Elliott Trudeau International Airport, and I say that very proudly, was where the Ferry Command was based. The Ferry Command was a process by which planes would leave from Dorval and fly to England. These airplanes were being delivered to the air force over there.
Montreal has an extremely rich history, and throughout that history it has built up an industrial cluster or an industrial ecosystem.
Because next week is Tourism Week, I would also like to mention, in passing, that in my riding of Lac-Saint-Louis we have the Montreal Aviation Museum, which I invite members to visit because they will learn all about Montreal's and Canada's aviation history.
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- Apr/20/23 12:49:55 p.m.
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Madam Speaker, my colleague on the other side mentioned the Avro Arrow project several times. The project was scrapped by Mr. Diefenbaker, but the initial push to sideline it began under St. Laurent's Liberal government.
The current Liberal government has also ignored an airline that wanted to develop the aviation sector further by supplying aircraft. Instead, the government turned to a U.S. company that played a role in the demise of the Avro Arrow.
What are my colleague's thoughts on the matter?
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- Apr/20/23 12:51:26 p.m.
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Madam Speaker, I am pleased to follow such a great speech from my colleague from Bay of Quinte.
I would remind those watching at home and my constituents what we are discussing today. Today we are discussing a report done by the Standing Committee on Industry and Technology of the House of Commons, entitled “Development and Support of the Aerospace Industry”. It was tabled in this Parliament in June 2022, but is actually a study that spans two Parliaments. It was started in the last Parliament before the last election when the now Conservative leader was the vice-chair of the committee and then continued in this Parliament after COVID. It is quite a span of time, but affects a lot of the tone and position of where the industry is.
I should start by saying that we are all mentioning aerospace companies within our regions or ridings. There is a company in my riding, the beautiful UNESCO heritage town called Lunenburg, which everyone may have heard of. The company is called Stelia North America, which makes parts for the Airbus 737 Max and the F-35 aircraft. Unfortunately, because of the dithering by the government on the purchasing of the aircraft that it said it was not going to buy and now has ended up buying, a lot of jobs were lost in that interim period in Lunenburg that it now has to try get back since the government is now going to buy the aircraft it said it was not going to buy.
It is important to understand what has happened to this industry. There is a really interesting section in this report, on page 6, that says, “Canada’s aerospace sector had fallen from the fifth-largest in the world in the 1980s to the ninth largest.” It goes on to say, “Canada was once the fourth-largest aircraft manufacturer but it has dropped to the 12th”. Recommendation 5 in the report has been mentioned before, which talks about having an aerospace strategy. There were aerospace strategies in previous governments that led us to be a much larger player in the world than we are now, but in the last eight years of the Liberal government, we have not had any strategies, and that is what this unanimous report points out in recommendation 5. I would point out that the Liberals agreed with this, too.
After eight years, what has been the Liberal strategy? The Liberal strategy was to bring in a luxury tax on aircraft. That was their strategy because they have never met a tax they did not like. In fact, the Minister of Finance said, when she introduced it last year, that this would make the wealthy pay their fair share. However, the reality is that when we look at the numbers and the performance of the industry, the cost of this tax is actually being borne by the workers in the aerospace industry, not by the corporations. I will go through that in a few minutes.
There was a report done by an economist out of Montreal, Jacques Roy, who words for HEC, an economic think tank in Montreal. He talks about that tax, which was introduced on September 1, 2022, by the Liberals, and the impact it had. The tax revenues expected from the new aircraft tax he says are negligible. A May 2022 Parliamentary Budget Officer report estimated the tax on cars, planes and boats, which were all included in that tax, would raise $163 million in 2023-24, but only an insignificant $9 million of this total was expected to come from the aircraft tax. The PBO also projected an annual reduction in aircraft sales, as a result of that tax, of $30 million. Obviously, the impact is much greater on jobs and the economy than the tax benefits the government.
That tax also affects the reputation of our industry. The PBO cautioned that estimates were qualified by several uncertainties and unknown behavioural responses to the tax. There are always behavioural responses to taxes when they are brought in. This economist did a deeper dive into the impacts of that tax, and I will share with the House what the findings of that were.
It has a qualification that it has to be 90% business use in order to be exempted from the tax. That has proven to be unworkable because the jets that companies like Bombardier sell are not used by that company 100% of the time. Because of the way those jets are utilized, the qualification does not apply to the businesses. Commentators have noted that the 90% threshold is harsh in comparison with the primary use standard; in other countries that have done this, this is usually only 50%. This is commonly used in the United States and Europe as an alternative source of determining whether the tax applies to the jets.
The PBO's research expressed a concern about the narrowness of the exception. Although the tax targets aircraft sold to private individuals for nonbusiness use, it also applies in practice to situations involving mixed use; that is, for some business use and some personal use where it cannot be confidently determined that the 90% test has been met. In this regard, it is important to understand the unique practices of the aerospace sector. Buyers of business jets and helicopters usually outsource the management, servicing and maintenance of these aircraft to management and leasing companies. Even owners who acquire a jet principally for business purposes, and do not intend for it to be used for personal purposes, will face considerable difficulty in determining whether that 90% test applies. They will ask leasing companies to rent the aircraft out to other customers when they are not using them.
This is where the issue comes into play. Canadian-based leasing companies may rent these aircraft to U.S.-based charter brokers. They, in turn, may charter the aircraft for their own clients. The person who is subrenting or leasing it may use the aircraft for business or personal use. Very limited information, if any, is available to the owner regarding the other uses of the aircraft in these circumstances, partially because of privacy laws. It may therefore be quite challenging, if not impossible, to determine whether the purpose of the trips taken in such cases is business or personal. That makes the determination of whether the 90% test has been met especially difficult.
According to the PBO's interviews in doing this research, the introduction of the luxury tax has already had a huge impact. The negative reaction from clients has translated into lost sales for Canadian aerospace manufacturers and their supply chain. It is estimated that the business aircraft segment experienced a drop of 8% in sales in 2022 because of the tax. This represents roughly $480 million in lost sales. That figure is significantly higher than the $30 million projected by the Parliamentary Budget Officer. He estimated that this drop in sales would result in the loss of approximately 750 direct jobs in Canada. The estimate is based on the number of direct jobs required to produce the aircraft for which sales have been lost. Personal income taxes paid by just these individuals exceed the annual revenues expected by the government from the luxury tax.
For helicopters, research indicates that private individuals are likely to postpone or abandon the purchase of approximately five new helicopters per year or to buy a used model. This will result in the loss of 15 full-time jobs and lost annual salaries of approximately $1.3 million.
The impact of lost sales also ripples down through the aerospace industry and supply chain. For business jets alone, it is estimated that the loss of 750 direct jobs will cause the loss of an additional 1,200 jobs in the industry's Canadian supply chain. The PBO estimates that these workers' personal income taxes at the federal level alone will be approximately $14.3 million.
In my view, these figures are fairly conservative. They would be much higher if we were to add the figures for all of the indirect and induced job losses in the industry. These figures also underestimate the impact of the maintenance, repair and overhaul activities on other small and medium-sized enterprises not interviewed in the course of the research.
I am running out of time, so I will just say that the strategy called for in this report is a strategy to tax. That is the only one we have after eight years with the Liberal government. That is where the government goes to, and the result will be massive job and economic losses for our country.
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