Airline deregulation puts private profit above public and industry
Concessions by employees have gone straight into pockets of private investors.
by Peggy Nash
July 27, 2009 — As chief negotiator for the CAW in the recent round of talks with Air Canada, I have seen first-hand the shortcomings of privatizing and deregulating key sectors of our economy.
After months of bargaining, all five Air Canada unions have now agreed to cost-neutral collective agreements for a period of 21 months. We've joined the retirees in agreeing to allow Air Canada a funding moratorium on past contributions to the pension plan for the same period. This is a funding risk that will be borne by the employees and retirees in order to help Air Canada through bad times.
Air Canada is once again teetering on the brink of bankruptcy protection (CCAA), after just emerging from CCAA six years ago.
At that time, the courts approved a plan that saw Air Canada Enterprises (ACE) take on the role of major shareholder of Air Canada. ACE spun off key profitable segments of Air Canada, such as the Aeroplan rewards program, the maintenance section, and its regional carrier, Air Canada Jazz.
These were sold for huge profits that benefited the investors, especially US hedge funds, and the key executives, including Robert Milton, who happily pocketed his share. This is the kind of irresponsible corporate behaviour that is driving Americans crazy but doesn't seem to attract much notice here in Canada.
Throughout this process, Air Canada workers have borne the brunt of the restructuring. Under bankruptcy they gave up more than $2 billion in cost savings to Air Canada only to see this money travel right into the pockets of the investors.
The airline is so short-staffed that when bad weather hit last December during the holiday period, Canadian air travel ground to a halt and there was not enough staff to deal with the crisis. The travelling public took out its frustrations on the same workers who were trying to hold the operation together.
Opposition to so-called Big Government and the Nanny State fostered the climate that led to Air Canada's current precarious state. In Canada and around the world, governments of all stripes fell into the trap of "the private sector does it better."
Certainly this philosophy made some people very rich, but it also left some governments nearly bankrupt, eroded key services like health care and transportation, and exposed a philosophy of greed that works against the public interest. Ask anyone affected by the financial meltdown inflicted on the world by Wall Street how effective the unregulated private sector can be.
Airline deregulation has led to the bankruptcy and disappearance of dozens of companies with all the usual pain and heartache for the staff and travelling public. Since Air Canada was privatized it has lost a grand total of almost $6 billion.
The latest downturn in the economy has created a crisis for many of the world's airlines, but for companies like Air Canada, which was already in a precarious state, the loss of revenue, the poor hedging of fuel prices, currency fluctuations, and the poor state of pension plan investments added to its economic difficulty.
Competing companies like West Jet and Porter predictably react by adding more airline capacity to the market, even when travel is declining, in the hope of further damaging Air Canada so that they can gain more market share. This illogical behaviour is encouraged under our current "anything goes" air travel regime.
Unions have once again done the responsible thing by holding the line and trying to keep the company out of bankruptcy, with retirees joining in the effort. But ultimately, we need some sanity and some regulation restored to our air travel.
This doesn't mean returning to the old ways. A modern regulatory system would prevent the dramatic swings in the airline sector by imposing responsible limits on the overall capacity growth of carriers. It would stop the destructive attacks of one company on another through excess capacity.
It would also mean our federal government taking an equity stake in Air Canada not buying the whole company or running the day-to-day operation, but helping with its long-term financial stability.
If the alternative is a complete foreign takeover, such as happened with our railway system, keeping our government involved in our national air carrier is definitely preferable.
The travelling public in Canada, and the workforce who serve them, have endured enough.
Let's not let another travel business needlessly go under. It's time to put some sanity back into our national airline.
Peggy Nash is the assistant to CAW national president Ken Lewenza and a former NDP MP for Parkdale-High Park.
Posted: July 30, 2009
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