44th Parl. 1st Sess.
April 20, 2023 10:00AM
- Apr/20/23 10:20:56 a.m.
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Mr. Speaker, over the past few years, when we raised the issue of the aerospace industry and its need for financial support, we have often been told that the major airlines are already receiving funding and support. However, the aerospace industry is much more than just the big airlines.
I would like my colleague to explain what the aerospace industry is exactly.
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- Apr/20/23 10:21:29 a.m.
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Mr. Speaker, I was just thinking of my colleague's leadership when it comes to the importance of the Davie shipyard.
It is important that the government also choose Quebec companies in order to better share the wealth. Too often, we feel that we are not getting our fair share, and the national capital region has the same problem.
In answer to my colleague's question, I want to quote Jean Lapierre who, when he was minister, said that the aerospace industry is to Quebec what the automotive industry is to Ontario.
What does the aerospace industry in Quebec represent? It represents 400,000 direct jobs and 100,000 indirect jobs; 220 businesses, including 200 SMEs; $18 billion in revenue; 80% of production for export, since it is Quebec's largest exporter; 12% of manufacturing exports; 50% of jobs in Quebec; 60% of sales; 70% of research and development compared to the rest of Canada; and 55% of industrial research in Quebec. It is the third-largest aerospace hub in the world after Seattle, with Boeing, and Toulouse, with Airbus. It is clearly an integrated industry.
There are only three places in the world with suppliers that are capable of manufacturing all of the components of an aircraft from A to Z, and the greater Montreal area is one of them. It is an absolutely vital industry, and we need to do more to support it.
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- Apr/20/23 10:24:01 a.m.
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Mr. Speaker, I am very pleased to acknowledge that this was a major step. In my opinion, this step is a direct result of the study done by the Standing Committee on Industry and Technology a few months before the announcement. The industry came before the committee and clearly stated its needs to the government of Canada.
Yes, the response was issued within a pre-election context, but this response must go beyond just one step. What we need is a truly comprehensive national aerospace strategy that will bring predictability for the next 15 years. The federal government must send a clear message to the Quebec economy underlining the importance of the aerospace industry.
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- Apr/20/23 10:35:20 a.m.
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Mr. Speaker, I agree, but let me rephrase a few things.
First of all, the member talked about helicopters made in Quebec. Indeed, we have Bell Textron, an amazing company. However, it is really sad that Bell Textron has never been able to bid on federal government contracts. Is that a coincidence? I wonder why that is. Therefore, the member might consider refraining from mentioning these companies.
I would also rephrase the member's words. Yes, I agree that we need to work with this industry. However, instead of saying that they are continuing to work with it, I would say they are starting to do so.
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- Apr/20/23 10:38:03 a.m.
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Mr. Speaker, I work with my colleague who sits on the committee. Clearly, these demands will not be ignored.
Of course, this also concerns the regions, as was mentioned a little earlier. The aerospace industry is not just in Montreal. It is also present in many places, in many areas. Small suppliers and small businesses are found all over.
A member said earlier that it is a constellation, a cluster. I want to emphasize that point because I believe that people are not fully aware of it. Quebec is one of the three places in the world where a plane can be fully assembled. Think about it. This means that all the parts can be manufactured and assembled in Quebec. This area is sustained by this important industry.
The luxury tax is a threat to at least 2,000 jobs, and some of them are definitely in the regions.
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- Apr/20/23 10:57:50 a.m.
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Mr. Speaker, we need to recognize that the aerospace industry is worldwide. At the end of the day, many manufacturers, both small and large, in Canada benefit by contract. For example, many would acknowledge that the F-35 is one of the top-rated aircraft in the world. Those F-35 wings are manufactured in the city of Winnipeg, at Magellan. Magellan has the expertise and skill sets that have an impact in the aerospace industry.
When the member says that Canada should be purchasing Canada only, in part, he does a disservice to the expertise we have in towns across Canada. Many of those skill sets can provide for the aerospace industry worldwide.
Could he could provide his perspective on the importance of Canadian skills being able to capitalize on worldwide tendering projects?
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- Apr/20/23 11:04:25 a.m.
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Mr. Speaker, the aviation and aerospace industry is really important in Longueuil. We have an airport, there is Héroux‑Devtek and Pratt & Whitney. I even visited Pratt & Whitney, which is working on a hybrid electric engine. I saw it, from a distance. The company does not reveal its secrets to just anyone, but I know that it is working on it and it is important.
This is an issue my colleague raised. He talked about the fight against climate change in relation to the aerospace industry. He seemed to suggest that it was not very significant, but he did highlight the fact that the industry is responsible for 3.5% of greenhouse gas emissions. If the industry were a country, it would be the 11th biggest emitter. That is actually significant.
I would like my colleague to tell us more about the importance of working on this. The most radical environmentalists are telling us that no one should fly anymore. I do not think that that will happen overnight. We need to help the industry gradually migrate to hydrogen-powered electric engines, and time will tell. It is really important for us to invest in this area.
I would like him to tell us more about that.
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- Apr/20/23 11:05:39 a.m.
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Mr. Speaker, I would not ask my colleague to reveal Pratt & Whitney's industrial secrets, but I am pleased to hear that the company is working on this. I hope it will come up with a solution that allows the aerospace and civil aviation industries to improve their carbon footprint.
I was not trying to minimize the sector's importance. I was saying that 3% is not the same as 40%, although it is important. We have to do better. Every time I take an airplane, I make a donation to a Université du Québec à Chicoutimi program so trees will be planted to offset the greenhouse gas emissions from my flight. However, this is not a long-term solution. The industry will eventually have to improve its carbon footprint. The auto industry is currently making the transition. The inter-city bus sector is currently making the transition.
Yes, we need to do more and the federal government needs to do more to support the sector and innovation for research and development to reduce the carbon record of the air transport sector, which, by the way, is not going anywhere either. I think that everyone will want to get together, meet up and visit other countries. I do not think this is ever going to stop. We can reduce, be more discerning about how often we fly. We need to encourage the industry to have a much more acceptable carbon record.
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- Apr/20/23 11:17:14 a.m.
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Mr. Speaker, I appreciate the member's reference to the automobile industry. It is important for us to recognize that often in different regions of the country we will find certain industries that have excelled. When we think of the automobile industry, we have to think of the province of Ontario.
When we think of our aviation and aerospace industry, which is very strong and healthy, we think of the province of Quebec. We also have significant industries in Ontario, Manitoba, British Columbia and even in other areas, and it all feeds into the bigger picture of Canada's aerospace industry. I say that because it is important that we recognize that there are many ways, both direct and indirect, that the government has been supporting the aerospace industry.
Could my colleague provide his thoughts in terms of the worldwide impact on the aerospace industry which has been hit hard by the pandemic, leading to less demand as a direct result of the pandemic?
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- Apr/20/23 11:18:33 a.m.
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Mr. Speaker, I understand my colleague's question, that the pandemic had a global impact on the industry. The impact in Canada is even greater. The Canadian industry is so developed that we are not only supplying aircraft to Canadian companies such as Air Canada, WestJet and others, but we are selling aircraft, and aircraft engines and parts around the world. Obviously there was an impact.
My colleague's question is interesting because he talked about the automobile sector. He said that this had repercussions across Canada, which seems obvious to me. In my riding, there is a company called Liberty Spring. It supplies half the shocks of all the vehicles built around the world. We can be extremely proud of that kind of business. Its headquarters are in Montmagny, in my riding. I am a business owner myself. We can be proud of what business owners have done to develop this industry for over a century now in Quebec and Canada. The same goes for the auto industry. These industries are not in competition, and we should not frame them as such.
We all have to work together in this country.
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- Apr/20/23 11:30:44 a.m.
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Mr. Speaker, my hon. colleague asked our government to do more. Located in both my riding of Mississauga—Streetsville and the riding of Milton, Cyclone Manufacturing is a Canadian company that competes in the aerospace sector. Our government launched the aerospace regional recovery initiative to help companies such as Cyclone compete on the global stage and adopt clean technologies. FedDev provided Cyclone a repayable investment to develop and manufacture new complex, green aerospace parts, which will result in Cyclone commercializing up to 1,500 new greener parts.
Could my hon. colleague give his thoughts on the importance of the green innovative solutions needed for the future of the aerospace industry?
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- Apr/20/23 11:32:30 a.m.
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Mr. Speaker, I thank my colleague from Mission—Matsqui—Fraser Canyon for his speech and, I would go so far as to say, his rigour. He is my ally when it comes to any rural issues relating to our economic development. Also, I always appreciate him making an effort to speak French.
He talked about a number of recommendations made by the Standing Committee on Industry and Technology. There is one that we have not really focused on yet, and I would like to hear his thoughts on it. It is recommendation 1:
That the Government of Canada ensure that a Center of Excellence on Aeronautics 4.0 be created and that it can bring together university- and college-level expertise in this field, and that this Center increase research capabilities and development in this sector.
This leads me to reflect on the whole issue of the importance of clusters. In his response, the minister stated that Innovation, Science and Economic Development Canada had established five advanced manufacturing clusters in February 2018, including Scale AI on artificial intelligence, advanced manufacturing and the digital technologies that support the aerospace industry.
However, there is no cluster or supercluster that directly involves the aerospace industry. Should such a cluster be created and is my colleague moving in that direction?
I would like to hear his comments on that.
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- Apr/20/23 11:33:40 a.m.
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Mr. Speaker, I thank my colleague from the Standing Committee on Industry and Technology for his question today. It was a very long question.
Perhaps I can answer the first part. It relates to the first recommendation in the report. I would like to know whether the Bloc Québécois would support a centre of excellence for the aerospace sector in British Columbia. Will the Bloc Québécois support the creation of good jobs in British Columbia in the aerospace sector?
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- Apr/20/23 12:03:01 p.m.
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Madam Speaker, I would like conclude this debate by saying that the industry is united.
The world is short some 6,000 aircraft and so far, the government's response has been timid, in the industry's words. Allow me to draw attention to the contributions of various people. We heard from 33 witnesses, including representatives from Aéro Montréal. I want to thank its president and chief executive officer. We also heard from Mike Mueller of the Aerospace Industries Association of Canada, along with the representatives of MDA, Airbus Canada, Airbus Helicopters Canada, STELIA Aerospace St-Laurent, Telesat and Unifor. I also want to thank Renaud Gagné of Unifor Québec.
We also heard from representatives of Boeing Canada, the Canadian Council for Aviation and Aerospace, Hexagon's Autonomy & Positioning Division, Rheinmetall Canada Inc., Boeing, Héroux-Devtek, NAV Canada, Bell Textron, and more.
Consultations with industry partners and union representatives have generated a broad consensus within the industry in support of a national aerospace strategy backed by the billions of dollars needed for the industry to develop. Is the government of Canada headed in this direction?
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- Apr/20/23 12:04:09 p.m.
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Madam Speaker, I recognize the incredible efforts that went into presenting the report being talked about today. Members who have provided comments thus far have been relatively encouraging in recognizing how important the industry is to the country. The inputs we have had from trade unions, from the bigger companies to the smaller companies, have been incredibly positive.
The Government of Canada takes the issue very seriously, and that is one of the reasons we are investing in enhancing skills in post-secondary facilities. It is one of the reasons we continue to work with the stakeholders to ensure we continue not only to support the industry but also to see growth in the coming years. We always need to put it in the perspective of the pandemic—
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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 12:33:12 p.m.
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Madam Speaker, as a member from the Montreal area, I support any investment that strengthens the region's economy.
I do not follow this file as closely as my colleague does, but I believe the government issued a report last summer on the state of the Canadian aerospace industry. I assume this report provided an overview of the industry's economic impact.
I expect the report will be used as a basis for a future strategic approach to this industrial sector.
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- Apr/20/23 12:35:02 p.m.
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Madam Speaker, this is a good question, but it presumes that the government has not been making strategic investments all these years in the industry, and it has. It is part of an evolving approach that becomes a strategy over time.
In terms of labour-management relations, I am not familiar with problems in that relationship, but I am sure industry and labour work pretty closely together, and I hope they continue to work closely together to promote the industry and make it stronger in Canada.
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- Apr/20/23 12:46:41 p.m.
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Madam Speaker, Elon Musk is doing great things.
I wish the member had listened to a bit more of my speech. The government has a role. The problem is the government has not been playing the role it needs to with the industry. The industry has spoken to our committee, and the industry has stated that it wants the government's role to be more in R&D and target specific, and that government should announce aerospace is a growing, specific, major sector for Canadian industrial policy. Then it should play the role it needs to. At first-stage innovation, government should put money into growing companies, and then let the private sector commercialize the IP of those companies and make all the money they can, so they provide paycheques to Canadians.
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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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