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Crash Course: Air Canada’s fight against the law

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When Air Canada transformed from a Crown corporation into a private company in 1989, president Calin Rovinescu vowed that the airline would become “a more entrepreneurial and nimble company, a place where employees act as if they are owners”. Despite this hopeful projection almost 27 years ago, Air Canada finds itself locked in a struggle with Canada’s judicial powers in what Canada’s premier airline feels is a chance to emancipate itself from unfair expectations.

 

Air Canada, which brought in $13.27 billion in revenue in 2014, is appealing a decision from the Quebec Court of Appeal to the Supreme Court. The Court of Appeal found that Air Canada violated the 1988 Air Canada Public Participation Act, which states that the private company must maintain “operational and overhaul centres” in Winnipeg, Montreal, and Mississauga. This was done in an effort to protect Canadian industry from the company’s privatization.

 

Quebec initially launched a lawsuit against Air Canada after the airline pulled out of a Maintenance, Repair, Overhaul (MRO) partnership with Montreal-based Aveos. Air Canada subsequently partnered with Premier Aviation, a company that has facilities in Trois-Rivières, Quebec but is based in New York State. It also has a five-year contract with AAR Corp, which operates a specially built repair facility in Duluth, Minnesota.

 

After Air Canada severed ties with Aveos, the repercussions were catastrophic. Aveos went from doing $450 million worth of work for Air Canada in 2011 to having to lay off over 2,600 employees in Montreal, Winnipeg, and Mississauga. The Liberal Charest government then filed a lawsuit against Air Canada in April 2012, claiming that the closure caused over $18.5 million in tax losses. Aveos did receive a small boost when defence giant Lockheed Martin Corp. announced they would hire 100 former employees in early 2013 and establish a new facility in Montreal that would work on jet and omnibus engines, but ultimately the 75 year-old company could not be saved from insolvency.

 

Template illustration by Samuel Stein
Template illustration by Samuel Stein

 

In February 2013, the Quebec Superior Court held that Air Canada’s actions violated the Public Participation Act and the company was obligated to keep their Quebec-based maintenance facilities opened. In his decision, Justice Martin Castonguay concluded that Air Canada “[did] not respect the law put in place when it privatized in 1988”, and he stated that the loss of highly specialized jobs within Canada was directly against what legislators envisioned when introducing the Act. Air Canada appealed the decision, maintaining that it respected the law and the government of Quebec had no jurisdiction in the matter because aviation is a federal issue.

 

Despite this claim, then Transportation Minister Denis Lebel stated that the federal government was in no position to save Aveos jobs within Canada, but he did state that the Conservative government “presented a legal opinion which confirms that Air Canada respect the laws”.

 

The appeal process took almost three years, and on November 3rd, 2015, the Quebec Court of Appeal dismissed Air Canada’s claim, finding that Air Canada was in violation of the requirements of the Public Participation Act. The Court found that the instructions to keep operational centres in Montreal, Winnipeg, and Mississauga should be read as direct statutory requirements, necessitating a statutory amendment for Air Canada to alter its responsibilities.

 

Finally, on January 5th, 2016 Air Canada announced that they would appeal the decision to the Supreme Court of Canada. With two decisions already in their favour, Aveos may be optimistic that a final ruling will solidify their claim that Air Canada abandoned them financially. This would also represent a major victory for unions and contracted workers in general against huge corporations with infinite options for partnership, even if the ruling would be subject to a specific Act corresponding to Air Canada. Once the case reaches the highest court in the land, however, it is anyone’s guess to how it will go.

 

Regardless of the decision of the Supreme Court, if the Court even decides to consider Air Canada’s appeal, the conclusion will have huge repercussions for both Air Canada and Canadian air manufacturing in general.   If Aveos prevails, it could mean a serious blow to Air Canada’s sense of commercial autonomy, setting parameters for where and with whom they can conduct business. A final ruling in favour of Aveos could also change the way large Crown corporations go about privatizing since the Act at issue was introduced in order to keep Air Canada’s business as Canada’s business. If Air Canada wins this appeal, it would no doubt alter not only their ability to do business wherever they like, but it could also help other companies gain a sense of global freedom.

 

“Once the case reaches the highest court in the land, however, it is anyone’s guess to how it will go.”

 

Despite the high stakes, it has been difficult to predict or gain thoughtful insight on the case because it touches on multiple areas of law. One might argue that the case is a public law matter, which deals with the Province of Quebec’s autonomy to enforce decisions and force private companies to adhere to written law. However, with the Act being federal and aviation falling under federal jurisdiction, the issue does not seem to be who can enforce the law but rather whether Air Canada is violating that law through its actions.   One might also guess it could be a contract issue, but ultimately adherence to a federally-enforced law is not usually a contractual issue.

 

Air Canada Rouge in Richmond, British Columbia on April 28, 2014. (BEN NELMS for YVR)
Air Canada Rouge in Richmond, British Columbia on April 28, 2014. (BEN NELMS for YVR)

Finally, it could be suggested that this issue may be a labour issue about unemployed workers filing grievances against an employer that they feel has wronged them. However, Queen’s professor and labour law expert Kevin Banks feels that this case cannot be analogized to a typical labour dispute. “Ultimately the presence of the law makes it unlike a usual private labour dispute between employees and employers, and the general rules of labour law don’t seem to apply”, Banks explains, and perhaps a case like this may be unique and not fall under any one category of law.

 

“There have been plenty of labour disputes over relocation to cheaper jurisdictions,” he said, “but those disputes do not usually arise in relation to conditions imposed by statute upon the privatization of a publicly owned corporation.”

 

“The closest situation that I am aware of is when a company that has received public bailout money chooses to relocate.  But I am not aware of any of the particulars of any specific situation like that.  The first question to ask in such situations, from a legal perspective, would be whether our public representatives negotiated any job or investment guarantees as part of the bailout.”

 

With the framework of the case being governmental but the consequences totally commercial, a Supreme Court appeal will likely take into account various approaches and directions. Alternatively, it might simply be a case of statutory interpretation where the Supreme Court decides definitively on the definition of “operational and overhaul systems” and whether Air Canada is doing enough to respect those systems without Aveos as a contractor.

 

While a decision for or against Air Canada will probably not change the travel experience for most Canadians, a decision will affect the operation of Canada’s largest and most vital companies. If Air Canada finally sheds the weight of the Act regulating them since privatization, it will be clear skies to further economic independence. However, if the prior history of the case is any indicator, there may be much more turbulence ahead.

 


 

Ethan Gordon (1L) is a staff writer for Juris Diction.

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230 Comments

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    How can you compare air canada to any other airline? It is the only one that was state owned and has this relationship with government. This ruling will have no impact on anyone but air canada

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