Do I believe a "national airline" should be allowed to fail? Yes
Do I believe Air Canada should be allowed to fail? Yes
But that is where I draw the line. The airline industry is filled with hypocracy and, as much as I enjoy reading stuff published by CAPA, after reading a number of articles including their country profile on Canada in Airline Leader (Sep-Oct 2011) I get the feeling that CAPA is either a mouthpiece of or pandering to the agendas of the two major (state-owned) carriers of the United Arab Emirates. These are two carriers which do not behave in accordance with rational business principles and are protected from normal market disciplines, resulting in a markedly unbalanced playing field vis-à-vis foreign competitors.
As much as I am an advocate of market forces dictating the survival or demise of air carriers, Governments keeping their hands-off the business aspects of airlines (both in Canada and abroad), and a relaxation of foreign ownership limitations, I feel the CAPA article quietly pushes another agenda.
Having said that, I do think that Air Canada is a great airline (as far as North American service standards go) yet it would be very interesting if Air Canada were allowed to collapse (a la Mexicana) and see Canadian carriers scramble to fill the void. I believe life would go on and it might be the essential fire that would allow for a healthier airline environment to be born in Canada.