The Written Word
for October 3, 2001

Air Canada is, like Churchill said of Russia, "… a riddle wrapped in a mystery inside an enigma".

It is the airline that Canadians, at least from the western half of the country, love to hate. That’s because, in the western half of that western half, Canadian Pacific Airlines was the darling. And that in itself is strange when you consider how much Western Canadians are taught to hate its daddy, the Canadian Pacific Railway.

It’s the politics of this I want to discuss today. There is the story of the Prairie farmer who, after the fifth consecutive loss of his crops, shakes his fist at the sky hollering "God Damn the CPR!" But notwithstanding its dubious parentage, CP Airways was our airline. That’s because it started as the little airline that could and became largely a Vancouver and Calgary enterprise.

For years it was discriminated against by the Ottawa government which saw Air Canada as its baby – which it was – that had to be nursed and cosseted otherwise, somehow, the National Dream would never be realized. It was sort of like the CBC in that way – Central Canada knows best and if you just listen to the CBC and fly Air Canada, how can you possibly go wrong?

When Air Canada left government control and became part of the private sector it had quite a kick start from its former masters. With all its debts paid and the best of routes it challenged Canadian Airways International, as Canadian Pacific had become, which had the worse routes and lots of debt. The struggle was an unequal one and it soon became apparent that the experts had been right all along – Canada was only marginally capable of handling one national airline let alone two.

At this time the story becomes murky. Whose fault was it that Air Canada was smothering CAI? Was it government favouritism for Air Canada in days past? Was it that CAI was over extended and under funded? Was it just the latter’s bad management? In all events, the government was between a rock and a hard place. Even though in a market driven economy CAI should have been allowed to fold with whatever vultures in the neighbourhood able to pick at the corpse, the government feared the political backlash from the far West and it stepped in to broker a deal whereby Air Canada swallowed CAI.

Except it wasn’t permitted to do that. In exchange for getting a Canadian monopoly, Air Canada had to agree to keeping CAI employees on for a couple of years and left the sorting of seniority up to the parties and their unions.

This all coincided with questionable management in Air Canada. Most experts that have examined the company say that its management has been pathetic. Productivity is amongst the lowest in the airline industry while the president is paid as if he were running one of the best.

By the time of the September 11^th, 2001 disaster Air Canada was on the ropes. It took a hammering because of the terrorist attacks but it was in deep trouble before that.

The government has, essentially, provided three medicines at once. It has allowed Air Canada to raise the amount of foreign shareholdings. That would be lovely if Air Canada had anything to sell investors but in fact it doesn’t.

Air Canada has been given some compensation for the September 11 disaster but compared to its needs, this scarcely amounts to the proverbial drop in the bucket.

And it has been allowed to lay off people in advance of its contractual deadline.

What does all this mean?

One can only speculate but my guess is that the government will provide a further bailout by buying back equity in the company.

This will be like Bre’er Rabbit and the tar baby – the government won’t be able to let go. Then, having once divested itself of an ongoing bad dream, the Liberal government in Ottawa will buy back a never ending nightmare.