Wednesday, April 04, 2012

Air Canada compliant with letter, if not spirit, of privatization act, says lawyer

MONTREAL — As the Quebec government launched legal action against Air Canada to force the airline to maintain its shuttered maintenance operations Tuesday, a confidential memo has advised federal bureaucrats that the carrier is not in breach of any laws.

The memo, classified solicitor-client privilege by Pierre Legault, the assistant deputy minister for Justice Canada's business and regulatory law portfolio, advised Yaprak Baltacjoglu, a Transport Canada deputy minister, not to pursue Air Canada for allegedly breaching the Air Canada Public Participation Act (ACPPA).

Legault's memo argues Air Canada is legally compliant with the 1988 federal act to privatize the airline because the wording on aircraft maintenance has not been changed by the airline.

The aircraft maintenance stipulations in the act state that Air Canada must retain "provisions requiring the corporation to maintain operational and overhaul centres in the City of Winnipeg, the Montreal Urban Community and the City of Mississauga," near Toronto.

Montreal's Aveos Fleet Performance Inc., a spinoff company which has performed the large majority of the heavy maintenance for Air Canada's fleet in those three cities since 2007, unexpectedly filed for bankruptcy two weeks ago, leaving 2,600 workers across Canada jobless.

On Tuesday, Quebec Justice Minister Jean-Marc Fournier launched legal action on behalf of the province, sending Air Canada a mise-en-demeure — a legal procedure short of a lawsuit — that calls on the airline to maintain its heavy maintenance operations and 1,800 related jobs in Montreal.

Fournier said the legal basis of Quebec's case against Air Canada is the 1988 federal act, which until then had been a Crown corporation.

He recalled commitments then by Air Canada management to maintain the airline's main maintenance base in Montreal. And he quoted then-Progressive Conservative transport minister Don Mazankowski saying Air Canada could not cease maintenance operations in Canada without parliamentary approval.

However, Legault's memo advises Transport Canada staff that "it is important to note at the outset that ACPPA only requires (Air Canada) to include the . . . (provisions quoted above) in its articles as opposed to directly requiring (Air Canada) to maintain operational and overhaul centres in the three communities."

In other words, according to the narrow legal opinion, Air Canada has only to keep that wording on its books to be compliant rather than comply with the substance of the wording.

One Montreal lawyer with a prominent firm said that "obviously, the intention of the act was to ensure that Air Canada keep its overhaul centres in Canada. To say 'oh well, technically Air Canada is in compliance,' that's clearly really pretty legalistic. Clearly, he's not taking into account the true intent."

Air Canada president Calin Rovinescu, a lawyer who specialized in corporate restructurings as a managing partner of Montreal firm Stikeman Elliott LLP, has repeated on many occasions that Air Canada is in full compliance with the act.

When asked what he would do if the airline does not comply with the province's legal move, Fournier said, "I will deal with that question at the appropriate time," adding later that if Air Canada does not respond positively within 10 days "we will go to court."

Unions, federal opposition parties, mayors and others have argued that Air Canada is in breach of its 24-year-old contract because it will outsource its aircraft maintenance, repair and overhaul elsewhere. They are asking the Conservative government to force Air Canada to maintain its planes in those three cities, so far, to no avail.

The federal government has not reacted to Legault's opinion, and has not indicated if it will adopt it as official policy.

Genevieve Sicard, spokesperson for federal Transport Minister Denis Lebel, was not immediately available for comment Tuesday.

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