REVIEW OF CANADA'S EXPANDING ROLE IN THE GLOBAL MARKET
Pierre Jeanniot, President and Chief Executive Officer Air Canada
March 17, 1988
Chairman: Ronald Goodall, President
Although Henry Ford is quoted as saying, "History is more or less bunk," the manner in which history repeats itself is often amazing.
I find myself today, St. Patrick's Day, March 17, 1988, welcoming an Air Canada president as, l learned earlier this week, did one of my predecessors on March 17, 1983. On that St. Patrick's Day five years ago, Claude Taylor addressed The Club with a speech entitled, "Who's Listening?" We listened then as we did in October 1938 to Philip Johnson, then vicepresident, Trans-Canada Airlines, who told us how that company was incorporated in April 1937, began hiring in October 1937, and had the objective of providing an "air transport service that is as safe and as well operated as any other in the world." Now, some 50 years later, that company has over 22,000 employees, revenues approximating $3 billion, carries over 11 million people a year, and remains dedicated to safety. Concerns about weather, appropriate landing facilities and pilot training have been expanded by concerns about privatization, airline deregulation, fleet renewal, and new international routes.
We also listened in April 1949 to Gordon McGregor, then president of Trans-Canada Airlines, on "International Aviation and an Empire Tie" (the reference at the time was, of course, to a relationship with a commonwealth of nations and not to flying across the ocean wearing an Empire Club tie!). We listened in January 1974 to Yves Pratte, chairman of Air Canada on "Air Canada-Challenges and Outlook." I believe that these facts prove beyond a doubt that Air Canada's frequent-flyer program of today was modelled on The Empire Club's frequent Air Canada speaker program. Today, Sir, as a benefit of this program you have a free lunch!
Pierre Jean Jeanniot was born in France, is a graduate of Montreal's Concordia and McGill universities and, we are told, has a love for philosophy and military history.
He joined Air Canada in 1955 and held various positions in research and development and management of technical operations. He contributed to the development of the first comprehensive "black box." Mr. Jeanniot was appointed vice-president, computer and systems services, then vicepresident, eastern region, assuming responsibility for subsidiary and associated companies. Early 1979, Mr. Jeanniot was appointed senior vicepresident, marketing and planning, and the next year was appointed executive vice-president and chief of airline operations, responsible for the day-today planning and operation of the airline. He became chief operating officer and effective June 1, 1984, Mr. Jeanniot was appointed President of Air Canada.
Over the years, Mr. Jeanniot has been very involved in scientific, academic, business, and community activities in many capacities, such as, president of the Canadian Operational Research Society, for which he published numerous papers on applied research; chairman of the board of directors, Universite du Quebec a Montreal; chairman of the board of the Air Transport Association of Canada; honorary chairman of the CBC Jerry Lewis Telethon for Muscular Dystrophy; member of the British-North American Committee, and member of the board of directors of the Toronto Ontario Olympic Council.
Ladies and gentlemen, please welcome Pierre Jeanniot, President and Chief Executive Officer of Air Canada, who will address us on a "Review of Canada's Expanding Role in the Global Market:"
I am particularly delighted and honoured to be speaking to The Empire Club of Toronto, one of the nation's most prestigious platforms. Our various regions, our diverse economic groups, our multiculturalism, and our linguistic duality are precious to the very nature of Canada. But they also often combine to generate centrifugal forces of potentially serious consequences for this country and its future direction. Extensive communication and dialogue are essential to our need to remain united, and to our ability to move forward as a society. And in this context The Empire Club can and does perform a vital communication role.
Speaking of communications, and since this is St. Patrick's Day, I am reminded of the story about an unfortunate Irish priest who had been caught in a flood. With the water level rising our priest had moved to the second floor of his house and was praying for help by the window. A man came by in a boat and seeing the priest in obvious trouble asked if help was needed. "No thanks," replied the priest, "I'm Irish and I know that the Lord will save me." Well the water level kept rising and the priest was forced to move to the roof of the house. A helicopter came by and the pilot shouted, "Do you need any help?" "No," replied the priest, "I'm Irish and the Lord will look after me." The water kept on rising and the priest drowned. Well, as you can imagine, he was most upset at this turn of events and as he arrived in Heaven he took his anger out on St. Peter. "I was a good Irish priest," he said, "and you did nothing to save me." "I really don't understand it," replied St. Peter. "There must have been an incredible breakdown in communication. First we sent you a boat, then a helicopter..." Well, so much for communications and the importance of getting the right message.
Now with this in mind, I would first like to refer to some of the myths which I believe have clouded the understanding of many Canadians, regardless of whether they live in this country's largest metropolis, Toronto, or in one of the smaller communities. I will then move on to discuss some of the realities that today confront Canada in the global arena, realities that are of great importance to our nation as we prepare to adapt to the changing world. And lastly, I will put forth some views on the challenge which must be met by this country, its business, and its people, to become truly world competitive.
We live in a world of continuous and almost overabundant information, but this seemingly does not make it easier for us to know what is actually happening around us. All too often we instinctively select from the sea of information that surrounds us the material which reflects our backgrounds, our opinions and beliefs in order to reinforce our own perception of reality. However, there are occasions when what we believe to be fact is not necessarily the case. When an inaccurate perception is believed by many, it becomes popular myth. It then gets treated as truth in our day-today conversations and gives rise to popular sayings and clichés. Of course many myths have at their origins some elements of truth.
There is a myth in this country that Canada is still a developing nation dependent on foreign management, ingenuity and capital. We like to project an image of ourselves as a nation that is modest about its achievements. And we never quite believe that we belong on the world stage. We are uncomfortable about praising our better industries and institutions.
Perhaps we are overly critical by nature because Canada is the only country in the world with I I official leaders of the opposition! When two years ago, for instance, members of the Group of Five, the world's most important industrial powers, chose to invite Canada along with Italy to participate as part of the so-called G-7, nowhere were the misgivings stronger than in Canada itself.
Yet, based on the strength of our economy, our enormous natural resource base, our position in global trade, and the increasingly worldwide activities of our multinational enterprises and financial institutions, the reality is that Canada is truly an international power.
How international are we? A Canadian company is the largest commercial landlord in New York City. The world's largest baker is Canadian. And then there is that consistent world giant, Bata, the globe's largest shoe manufacturer.
These are not just isolated cases of Canadian companies that are doing well in the international arena. Well over 75 per cent of the sales for such major Canadian corporations as Northern Telecom, MacMillan Bloedel, Alcan, Inco, and Seagram come from outside the country.
And what about our institutions? The award-winning National Film Board, the world-class CBC, not to mention our musicians, writers, actors and painters who are increasingly recognized internationally.
In last year's Fortune 500 ranking of non-U.S. companies, Canada claimed 32 entries, more than three times as many as Italy and just four behind France. What would you call a country whose economy ranks eighth in the entire world - yes, eighth. Certainly not middle-sized! And ... while our economy may rank eighth in size, figures from the Organization for Economic Co-operation and Development show that last year Canada and Britain led the other members of the Group of Seven with a 3.75 per cent growth in gross domestic product. We are not middle-sized either when it comes to our foreign aid program - $2.5 billion per year provides a lot of Canadian assistance, medical care, and influence abroad.
And what about the development of the most important resource of all, our people, our youth? We can certainly be proud that a higher proportion of the Canadian population is enrolled in secondary and post-secondary educational institutions than in any other country except the United States.
Now there is just one more Canadian myth that I would like to put to rest. Ladies and gentlemen, Air Canada is not subsidized by the taxpayer. The reality is that we have not received any government subsidies since 1962. That's right, not one penny in the last 26 years.
In spite of the fact that the airline business is very much capital intensive, we have been denied access to equity, whether private or public, since the last equity infusion by the government which took place more than 10 years ago. In comparison to our main domestic and foreign competitors, we do not enjoy a level playing field. We are subjected in the same manner as every business to all federal, provincial and municipal taxes. And any funds which are being raised through the various borrowing instruments available to us are being obtained without any government guarantees whatsoever, which is fine with us.
So please, don't let anyone tell you that we still enjoy some special privileges. Those days are long gone, except perhaps in the imagination of our competitors. We do not need, nor do we seek, any special privileges, just freedom to move. The reality is that we have become a customer-service-oriented, technically strong, and commercially aggressive airline.
We are one of the world's leading airlines and very proud of that fact. Hopefully, we can lay to rest some of the myths concerning Air Canada, as people become increasingly aware of our expertise, quality, and international competitiveness.
In just a couple of weeks, Air Canada will announce its financial results for last year. I can assure you that despite the intense competition within our industry, both internationally and domestically, and several factors including the disruption to our service in the latter part of 1987, we remained clearly in the black. In fact, our profit picture for 1987 will show a modest improvement over the previous year. This year we are aiming for a significant increase in net profit. This would position us squarely with the world's more financially successful airlines - in the winners' circle, if you will. Producing an adequate profit while fully meeting the evolving customer needs is, I believe, proof of good management.
It will also provide much of the funds required for fleet renewal and expansion. To remain one of the world's leading airlines, it is essential to periodically upgrade our fleet with aircraft that offer the latest in passenger comfort and safety as well as provide Air Canada with improved operating efficiencies and costs. And you can count on Air Canada to keep offering the Canadian public a modern and efficient fleet.
But that's enough of a commercial. Let's get back to the greatness of Canada, and the fact that we have achieved quite a lot, despite our modest and demurring attitude, brings me to my second point.
I believe that as a country we have gone about as far as we can with our traditionally quiet and unassuming posture. In 1950 world trade amounted to $60 billion (U.S.). By 1960 this had doubled. By 1970 it doubled again, and by 1980 it had expanded a further sevenfold to reach $1.9 trillion (U.S.).
Of the 22 richest industrialized nations in the world, 19 belong to a trading bloc. (And, by the way, the European Economic Community is rapidly proceeding through its final phase of market integration covering all services including transportation, financial and consulting.) Only Japan, the United States, and Canada do not belong to a trading bloc. However, Japan has a domestic market four times the size of Canada concentrated in a much smaller geographic area and with a much greater degree of homogeneity. It is geographically part of the largest and potentially richest market in the world - Asia. The U.S. market is more than 10 times that of Canada. Therefore, of the richest industrialized nations, Canada could be the only one not enjoying reasonable access to a market of over 100 million consumers.
Now, what are some of the other global factors we face? There is the rise of new international competitors, those recently industrialized nations such as South Korea, Taiwan, Singapore, Hong Kong, Brazil and Mexico.
Linked to these shifts in global competitiveness and markets are the patterns of population changes. By the year 2000, there will be more than six billion people living on the globe. Even more staggering, four billion will reside in Asia. This region will produce and consume more than the rest of the world combined. As a result, Asia's industrial base will be larger than the collective industrial power of North America and Europe.
Coupled with this is the fact that demographically there is a slowing of the population growth and an increasingly aging population for Canada ... and all of the traditionally industrialized countries such as Britain, Germany, and the United States. Motivating these people and maintaining within them the desire to change and adapt to constantly evolving world competitive conditions may prove increasingly difficult and will require a great deal of cooperation and participation from the various labour movements.
By contrast, the newly emerging industrial countries will be producing millions of young enthusiastic workers, giving those countries considerably more flexibility to adapt to changing needs.
What does all of this mean for Canada - a country still unsure of its place on the global stage, yet with all the potential to be a true world leader? This brings me to my final point.
The challenge we face is straightforward - to ensure that our entire economy is internationally competitive. As a country we must recognize the importance of the global market and strengthen our active presence. And as businesses we must not only become more aggressive in marketing our products and services to our traditional trading partners, we must also continually seek to develop new markets in all other parts of the globe.
Over the last few years, Canadians have acquired a good awareness of the Pacific Rim's economic potential. However, we must also learn to think in terms of South America ... of Southeast Asia, and of the Middle East, as well as Africa. These are also some of the growing markets of the 21st century.
Part of the answer obviously lies in the proper harnessing of new technologies. It is through the continued research for applications of new advances in technology that Canada can develop "niche products" which can be world competitive.
But technology is only part of the answer. The character and initiative of our people will be at least as important to our success. Canada needs men and women who feel the pride of producing high-quality products and services, who have drive and initiative, and who are excited by the challenge of being world competitors, of being world leaders.
How do we ensure this happens? First, we must establish a clear vision of our role as a nation based on a firm understanding of our accomplishments and of our potential.
Second, we must work at removing the barriers, those barriers within ourselves, because of our size, our fears, our modesty. We must strengthen our confidence based on our success stories and the many assets we have as a nation.
Then, of course, we must also work at removing the barriers that are truly blocking access to markets because of existing trade restraints and quotas set up by other nations.
Lastly, we must instil an all-pervasive desire for excellence in everything we do. Recognizing that the only long-term winning formula is to achieve the best quality at the best price, we must set the standards of excellence and show that they can be accomplished. We must foster the pride and deep satisfaction that comes from knowing that we are truly world competitive and able to hold our own among the world's best. This and only this will allow Canadians to continue enjoying their accustomed high standard of living.
As Canadians we all share individually in the responsibility of assuming fully what we are collectively - a world-class nation. And we must get on with the task of taking our rightful place on the world stage. It is time we shed our timidity, our excessive modesty, our misgivings about our capabilities and our ability to compete in the world arena.
We have it within our grasp to be one of the world's most influential nations. It is time we project more fully this image, to ourselves and to the world, with quiet strength, dignity, and confidence. Only in this way can we make the decisions today that are so necessary to ensure our future.
Let's put to rest the myth of Canada, the average nation, and promote the reality of Canada's greatness. And let's get on with building a great future for all of us. Thank you.
The appreciation of the audience was expressed by John Freyseng, a Director of The Club.