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Air Canada wins right to outsource heavy maintenance work

This file photo shows planes sitting on the tarmac at Toronto Pearson Airport, in 2011. Aveos Fleet Performance on Monday sought bankruptcy protection, saying a sudden drop-off in aircraft maintenance work for Canada's flag carrier, its biggest client, had forced it to shutter operations. (AFP Photo/Bruce Bennett)

A standoff between Air Canada and the Manitoba government over the airline’s right to move maintenance jobs out of Winnipeg ended yesterday with the signing of Bill C-10 into law.

The contentious bill to amend the Air Canada Public Participation Act and lift a long-standing requirement that the airline keep its maintenance operations in Winnipeg, Montreal and Mississauga boiled over Tuesday with a senior executive at the airline issuing an ultimatum to the Federal government.

“If this bill does not go forward, we will not create the centre of excellence in Manitoba, and we will not create a centre of excellence in Quebec,” Kevin Howlett, the senior vice-president for government affairs and regional markets for Air Canada told the Senate, adding that the company would also cancel its order for 75 new C-series jets from Quebec-based Bombardier. “We are not prepared to make that scope of a financial commitment and do so in an environment of legal uncertainty.”

Manitoba Senator Don Plett, a vocal critic of the amendment hit back at the airline.

“So in plain words, ‘You do what we want or we’re going to stick it to you,’” he said.

The row was catalyzed by the bankruptcy of Air Canada subsidiary Aveos Fleet Performance in 2012, which led to a loss of 2,400 jobs, 400 of which were in Winnipeg. Aveos handled the airline’s heavy maintenance work but after the bankruptcy, those high-paying jobs were outsourced in favour of more economical labour in other countries. Quebec sued, supported by Manitoba, and won but the signing of the bill means Air Canada has more control over where the heavy maintenance gets done. Manitoba will get a $20-million investment in aerospace training in Winnipeg as a means of compensation from the federal government.

“The original legislation was really stupid, it was there to appease Québec – it was done for political reasons there was no economic justification for it,” says Fred Lazar, aviation analyst and professor at York University’s Schulich School of Business.

In his opinion, Air Canada was “absolutely right” in telling the government to change the law.

“It’s archaic… Air Canada sold off their heavy maintenance operations (and) has no intention of getting back into that business,” explains Lazar. “They’re dealing with third party suppliers and saving about $200 million a year on heavy maintenance as a result.”

Douglas Reid, an adjunct associate professor of business strategy at Smith School of Business, Queen’s University says part of the reason the bill is so dividing is that the airline has a tendency to be tethered to the political realm with most people looking at their airlines as a source of national identity but further to that, a source of high-paying jobs in an innovative industry that should be kept within the country.

“There’s a kind of weird hubris to think that only people from one’s own country can do this work properly,” says Reid. “That simply isn’t true.”

He points out that while the airline industry has avoided modernization through legislation keeping jobs in the country, the reality of the current global environment is we are, for the most part, a country that supports free trade with other countries.

However, Reid is quick to point out that while this whole discussion surrounding the Air Canada Public Participation Act has stirred up an ideological argument on both sides, the heart of the argument is over the dollars and cents.

“What Air Canada is asking for under the guise of ‘let’s just do it the way everybody else is doing’ isn’t fully true,” he says. “Primarily it’s about them making more money or reducing costs under the guise of freedom to operate – but there’s no confusion, this is not an ideological thing, this is greed.”

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