www.wingsmagazine.com

Features Operations
Alternate Approach: Airline access and frequency

Having managed Canadian airports to the brink of bankruptcy in the 1970s and early 1980s, Transport Canada should have learned its lesson.


April 14, 2010
By David Carr

Topics

Having managed Canadian airports to the brink of bankruptcy in the 1970s and early 1980s, Transport Canada should have learned its lesson.

airlineaccess

The devolution of Canadian airports that began with the Mulroney government in the mid-eighties marginalized Transport Canada’s centralized decision-making and reversed the flow of hundreds of millions of dollars going out to prop up Canada’s crumbling airport infrastructure, to where airports are now net contributors to the federal treasury.

Transport Canada resisted commercialization at every turn and at least one senior bureaucrat had to be removed for obstruction. Almost 25 years later, the ministry is trying to push through the back door what it can no longer get through the front. Ottawa remains the gatekeeper to airports for countries that do not have an open-skies agreement with Ottawa, which at this moment includes most of the planet. It is a position of authority that does not fit with the commercialized business model of
Canadian airports.

Airports compete for traffic. Just as it would be wrong for Transport Canada to make decisions on access to Halifax based on how it affects St. John’s, it is just as egregious to starve airports of revenue based on the commercial interests of one airline or its international partners.

This appears to be the case in Calgary, Toronto and Vancouver, where Transport Canada stubbornly refuses to grant Emirates Airlines daily service at a cost of $480 million in economic benefits according to Vancouver-based InterVISTAS Consulting, a transport and tourism specialist hired by the airline. The Greater Toronto Airports Authority estimates daily service by Emirates and Etihad would result in an additional $3.2 million in revenue and create more than 500 jobs. Transport Canada’s position routes between Canada and the United Arab Emirates (UAE) are adequately served with six flights weekly split between Emirates and Adu Dhabi-based Etihad Airways. On the surface it would be right, but it is blinkered thinking. Air Canada does not have a presence in the growing markets where Emirates is strong. Lufthansa, Air Canada’s Star Alliance partner does, and there lies the rub. It is in Air Canada’s commercial interest to keep passengers in the Star Alliance pen. But should Transport Canada be playing the role of herder?

The issue is coming to a boil, with Premiers Ed Stelmach of Alberta and Gordon Campbell of British Columbia joining the fray. It is hard to see how the federal government, with its distinct western hue, can resist, except the UAE may have overplayed its hand by appearing to link the Canadian military’s future use of a Persian Gulf airbase to expanded commercial rights. The base gives the Canadian Forces critical logistical support for the Afghanistan mission and is up for renegotiation later this year.

Emirates is not a one off. Two years ago Ottawa prevented Singapore Airlines (SIA) from ramping up its Vancouver service to daily. SIA pulled out of Vancouver in April 2008 as part of a global retooling in response to plunging traffic volumes, evidence that a well run airline understands its market and can adjust its schedule accordingly. 

Alliances such as Star and oneworld took a giant leap forward earlier this year after the U.S. Department of Transportation approved an American Airlines/British Airways tie up that will result in greater collaboration on pricing, schedules and revenue splitting across the Atlantic. Star partners Air Canada, Continental, Lufthansa and United have a similar alliance within an alliance, loosely called Atlantic Plus. This could be the next step toward industry consolidation and the evolution of the global airline.

It also gives alliance partners greater clout at hubs such as London/Heathrow and Frankfurt, where Atlantic Plus will have a near monopoly on flights to Canada. All the more reason for Transport Canada to step aside and let access and frequencies be decided by airlines and the airport authorities that want to let them in.

A system where airports gain control over their runways is not perfect. Airports do compete, but they are monopolistic beasts at root. A dispute resolution mechanism would have to be set up to prevent airport authorities from negotiating cozy side deals with airlines to keep competitors out.

There is no place for Transport Canada bureaucrats, to be picking winners and losers.


David Carr is a Wings writer and columnist.