Should Air Canada be allowed to fail?
 

Air Canada is a different case entirely. Despite having a 40 % share of Canada’s large domestic market over 80 % of Canadian carriage on international routes, and being highly protected by its government, the airline went through the Canadian equivalent of Chapter 11 in 2003/4 (and flirted with this again in 2009, before being given a helping hand by the government) but it still carries legacy baggage and continues to struggle. Canadians may welcome a more competitive air transport environment but severe retrenchment by or collapse of such a dominant carrier would pose particular challenges, ways of overcoming which are worth exploring. Would the Canadian government be prepared to accept another visit to bankruptcy protection or should it look at other options?
Is Canada the last bastion of economic regulation?

Before looking into this question, some background. Air Canada has continually been protected by the federal government. On the domestic front, the flag carrier now incorporates a merger of a series of former competitor airlines: Wardair, Canadian Pacific Airlines, Eastern Provincial Airways, Nordair, Pacific Western Airlines, Canadian Airlines…….. Canada’s regulatory policy restricted competition and allowed Air Canada to become a monopoly Canada-wide until the no-frills, single class, single aircraft type (B737NG) Westjet was founded in Calgary in 1996 with oil business funding and later expanded towards eastern Canada and into the US.

Another independent startup, from 2006, Porter Airlines, based at downtown Billy Bishop Toronto City Airport, using turboprop aircraft (Bombardier Q400) domestically and transborder into the US, is now also nibbling at Air Canada’s edges. Despite competition from these dynamic innovators, AC continues to demonstrate many of the negative characteristics of a legacy carrier in terms of both price and quality of service. Air Canada’s revenue yields and unit costs are significantly higher than those of almost every other North American carrier (United being a notable, if temporary, exception), with unit costs substantially higher than Westjet. The airline has an ageing short-haul fleet and is cash strapped.

Internationally, Canada’s international regulatory policy is amongst the most conservative (and hence restrictive) in the world, founded not only on third and fourth freedom traffic rights but also reciprocity within this limited scope. In 1988 Canada even withdrew from the multilateral International Air Services Transit Agreement regarding overflight and technical stop rights during a bilateral dispute with the UK. By withdrawing from the multilateral treaty (which has 129 parties) Canada could thus use authorisation of overflights between the UK and the US (notably Chicago, San Francisco and Los Angeles) as a lever for restricting UK-Canada operations.

This protective policy has been even more clearly illustrated over the past couple of years following requests for increased access by Emirates and Etihad to Canada. Air Canada does not fly to the Gulf. And yet it opposes addition to the limited access by Gulf carriers to Canada, primarily on the grounds that the traffic would be sixth freedom, notably from India, a large end-to-end market for Canada.

Air Canada, paradoxically, itself has an avowed policy of exploiting sixth freedom by developing Toronto and Vancouver as hubs for traffic between the US and Asia. Air Canada also has a Star Alliance partner in Lufthansa, whose hub is Frankfurt (and Air India’s application to join the Star Alliance has recently been suspended).....And yet Air Canada stridently opposes a requested increase in the thrice weekly (and regularly full) services of each of Emirates and Etihad to Toronto, or any service by these carriers to Vancouver. Both Toronto and Vancouver have large South Asian populations, with substantial potential traffic which proposed service by the Gulf carriers would tap into. As shown by various economic studies, this would both generate new traffic and provide net national economic and social benefits to Canada (taking into account the – essentially minimal – impact on Air Canada). Air Canada has tried and failed more than once to provide a viable service of its own to India.

The position taken by Air Canada, concerned with increased competition, is perhaps understandable. But that of Canada’s regulators in not accommodating the larger picture begs belief.

Not content with being unable to make a financial go of its clout, Air Canada’s latest venture is aimed at squeezing out the much smaller Canadian leisure carriers which carry tourist traffic to Europe and sunspots in the US, Central America and the Caribbean, by establishing a discount carrier. The approach seems to be modelled on Qantas’ highly successful establishment of Jetstar in Australia in 2004, which has however generated considerable union unrest.

The sheer scale and resources of AC would undoubtedly impact Canadian leisure carriers such as Air Transat (which is itself in trouble), Sunquest and Sunwing, as well as AC’s main rival, Westjet. Canada’s Competition Bureau appears to have been asleep at the joystick on this (although they do follow events, a Commissioner intervening recently when AC proposed to strengthen its joint venture with Unied Airlines). In contrast, the Federal government has been so alert that when AC’s cabin crew recently threatened a legal strike at concerns regarding the pay and conditions of service at the discount carrier, it immediately intervened. The second time around the government took the step of referring the issue to the Canada Industrial Relations Board, requesting the Board to determine whether there were any “health and safety” (sic) reasons why a strike should be denied (thus legally disallowing a strike while the Board deliberates). This doubtful action, if probably directed more at union bashing than at protecting the travelling public, is a symbol of just how far the government will go in support of Air Canada.

And yet despite - or perhaps because of - being cosseted, Air Canada remains in trouble. Perhaps it should simply be allowed to fail this time around. There would undoubtedly be a major negative impact on the Canadian economy in the short term, and there is no doubt that transitional measures would be required, particularly as other Canadian carriers have not reached the critical mass necessary to fill the gaps in an all-inclusive way. It is ironic that the regulatory policy which has allowed Air Canada to have a dominant position creates a bigger problem when the lumbering behemoth can’t seem to hang in.

The impact on business and trade of the sudden disappearance of Air Canada would of course be huge in the absence of transitional measures. Tourism provides a more interesting scenario from a purely economic perspective. In 2010 Canada received 16.1 million international tourist arrivals, with expenditure of US$15.7 billion. However, Canadian residents spent almost double this amount abroad, US$29.6 billion. Thus a reduction in air service might actually reduce the imbalance in tourism trade (a feature exploited last year by Germany’s eco-tax, if no doubt protectionist).

Full article here from CAPA


American Airlines goes broke: Can a 'national' airline be allowed to fail? | CAPA

INCREDIBLE
 

Talk about drinking the KoolAid...:D:D

If you believe this rag, I've got a bridge for you to buy...:rolleyes:

RV-4

I admit that this article may beg some further discussion, however, what part of this article is so 'unbelievable?'. Why don't you tell us the 'truth'? To those on the outside, your present comments are less convincing than the article itself is.

( Please don't take the lead from Mr. Strachan. He made a damn fool of himself participating in that interview with Mr. Levant a while ago. That didn't help ACPA's/AC's cause at all.)

Jinglie'd

If you have ever flown with A C as a passenger then the answer is simple. YES.

Let AC go under?
 

Let AC go under? Yes.

Hmmm
 

Sounds more like management cooking up a plan to reduce their future employee costs.

CK

Real Passengers say YES to Air Canada
 

Hello RV-4 and The Grim Reaper,

On Dec 13th 2011, Air Canada was voted by the readers of Business Traveler Business Traveler (with an audited circulation of more than 150,000 subscribers) as offering the Best In-Flight Services in North America and the Best North American Airline for International Travel, the fourth consecutive year it has won these awards. Earlier this month, Air Canada was honoured by another influential business travel magazine when Global Traveler named Air Canada the Best Airline in North America.

I guess you two fellows know MORE than the real people that fly AIR CANADA, so get back on your horses and don't fall off again.

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.

Let Air Canada compete fairly within Canada....when AC was privatized itwas and continues to be handcuffed by the Canadian Government under its ACPPA...Air Canada Public Participation Act which mandates that AC has to keep its HQ in Montreal ( the highest tax base in Canada ), and keep maintenance bases in YUL, YYZ and YWG...

it is also more restricted under the official languages act than the other Canadian Carriers...reference the idiot that keeps sueing AC for not being ser ved his beverage in the French language...

so, instead of bashing AC, you should be lobbying the Canadian Government to release AC from the ACPPA and let them compete fairly, then we will really see what costs could be shaved.....and who will really become competitive

do u know that any correspondence within AC , bulletins, manuals, etc...that is written in english has to be translated to French....

They have to sink or swim, like any other business.
The "best North American whatever" awards just says that they are the best of the worst. North American inflight service is lame, try an Asian or ME carrier and dare to compare.
AC has not paid income taxes in years and don't expect to do so anytime soon (from their annual report); so tax rate is a none starter. Writing everything in English and French does not stop JAZZ and Transat from making money so why should it stop AC? As for maintenance bases, all the heavy stuff is done by Aveos in Central America, so what is your point?
Poor management and leadership, that's their problem.

Single Chime Jazz did not fall under the ACPPA . The government introduced ammendments Oct 17 2011 to change this. In effect because AC buys seats off Jazz AC is covering the costs. I suspect there are no translated B757 manuals at Jazz . As for Air Transat they do have unilingual F/As. I would like to know if all Air Transat manuals are translated . I was told the ACPPA costs AC about 250 million a year this number was quoted at a business lucheon.

ea340, don't get me wrong, I wish only the best to my friends working at AC. What bugs me is the idea that this tiny extra bit is the make or break item. Qantas as the same restrictions (minus the language one) yet have been consistently profitable even though they have not replaced their 744 by 777 (that's 40-50T extra burn per crossing! eye watering!!!). The AC board has been rewarding failure; heads should have been rolling at the top but instead you see massive increases in salaries and bonuses. If your management would show leadership, every employee would embrace the "everything must change" slogan.
And yes all docs at AT are bilingual and you are right not every CC proficient in both languages but the ratio that are is way higher.
Happy New Year!

single chime so you are telling me all A310 A330 technical manuals including maint manuals are bilingual plus sops bilingual at AT. All AC should get is a scrapping of the ACPPA then sink or swim . Will be intersting to see if Jazz will be required to move HQ to Montreal with that of course will come all the requirements of the latest versions of Bill 101 now tell me that wont cost. I assume also all Jazz F/As and gate agents will now be required to be bilingual will be intersting all at not cost of course. Should AC pay the costs Jazz will incur. The next question is CMA and Georgian all part of AC Express the plot thickens

Well, you have the right gov in place to change or completely remove the act. If you thing that will make AC stronger, the gov will certainly approve.

340 Dog is correct, the restrictions imposed on privatization make the playing field very unlevel. Regarding the translation of manuals there was a rumour years ago that when Air France heard that AC had translated all the Boeing manuals, they approached AC for copies since they had never bothered to translate them, proficiency in english being a prerequisite to fly there.
As I said, just a rumour.
IT

Air Canada failure
 

Further to my 3 Jan post. From the name handles that I see on this topic I assume most are pilots? So as an experienced pilot you most likely TRIED to get hired by Air Canada so it seems to me that the half that did not get hired are PO'd at AC and wish their demise. Sour grapes I guess

043A, never sent my resume to Big Red, so no sour grapes.
ea340, I stand corrected, Transat never went as far as translating FCOMs. But all other manuals, yes. Yet, I can't buy that translating 5 or 6 aircraft types manuals will amount to a 1/4 billion a year though. Other businesses have to keep all their stuff bilingual and yet make money (banks, or even the CN which has the same kind of federal act as AC and is also based in Montreal). If all dept were as good as your flight ops, AC would be just fine. How about execs bonuses based on performance for a start?

@043A:

Most of the anti-Air Canada postings are posted from foreign IP addresses. It's not hard to figure out which foreign airline pilots are unhappy with Canada in general and AC in particular.

So if a guy went overseas he's automatically a hater of all things AC? Gimme a break...most guys I know who went off shore in the last 15 years are so far ahead of where they would be (both finacially and seniority wise) at AC it's laughable! It made me laugh out loud at the old "you must not have made it through the interview" line...what a load of cr*p! Basically they could care less about you guys...

I was at AC, left, and am very, very happy I did. Joining AC was the worst professional decision of my life.

... And I do not have a foreign IP address ..

Jinglie'd