If AC was treated as a regular business, then, yes, it shoud be allowed to fail. But it's not a regular business. Successive federal governments continue to treat AC as if it were still a Crown corporation.
And then there's ACPPA. It should be scrapped. This would have two effects:
- an immediate reduction in costs;
- it could be a target of a foreign takeover (AC is already about 20% foreign owned)
Why would costs be reduced ? One example, there is a requirement that at least one FA be bilingual, no matter where the flight originates/terminates. If the 'designated' FA calls in sick, the flight has to be held until another one is found. As a business proposition this is retarded and drives costs up.
Costs have been driven down recently due to the new (imposed) labour agreements. Work rules have been changed significantly to permit more realistic use of labour. There's still a way to go in terms of internal costs -- at least one layer of management needs to be eliminated. Greg Saretsky, CEO of Westjet, has stated that WS's unit cost advantage over AC has largely evaporated.
Heavy mx has been moved off-shore, for example the 777 fleet C&D checks are done by HAECO in HKG. Mx is also done in Honduras and Israel. The only mx done at AC now is line mx, usually overnight stuff. The mx base at YWG, for example, is largely shuttered.
The pension issue has been clarified to some degree, reducing year over year cash flow requirements. And there will be a gradual move away from DB pensions to DC, which will ultimately yield large savings.
Moving to a more fuel efficient fleet is also helping. More 77W's are coming, and the 788's will finally show up starting 2Q 2014, permitting transfer of the 763's to the new Rouge brand. Whether or not Rouge will succeed remains to be seen, but it is (I believe) on a separate AOC than AC, so is not tied to AC's costs.
In the OP's post, he stated that AC was cash-strapped. Not true, AC reports indicate cash and equivalents on hand at around $2.3B. As well, they just raised about $800M to be put towards new narrow-body a/c. The decision on this will be announced by year's end.
AC is far from being out of the woods, but it's long term prospects are much, much better than they were even two years ago, let along seven or eight.