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Alternate Approach: In need of a ‘big fix’

Tony Tyler is no stranger to Canada. As director general of the International Air Transport Association (IATA), he is a part-time resident of Montreal.


May 8, 2012
By David Carr

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Tony Tyler is no stranger to Canada. As director general of the International Air Transport Association (IATA), he is a part-time resident of Montreal. In the early 1980s, as a rising star with Hong Kong-based Cathay Pacific, Vancouver was his home as he helped pave the way for the five star airline’s first route to North America.

Tyler1-high  
The federal government has absolved itself of blame for the Aveos collapse. That may be true on the surface, but is it accurate?


 

So, there was a level of homegrown insight last March, when Tyler delivered a speech on improving the competitiveness of Canadian aviation at the Montreal Council on Foreign Relations. Tyler drew comparisons between Canada’s aviation sector with Australia’s, another country the British national has called home. He referenced statistics compiled by Oxford Economics on behalf of IATA:

  • Despite having a significantly larger population, Canada lags Australia in passengers flown: 78 million passengers travel to, from and within Australia, compared with 71 million for Canada.
  • Aviation directly contributes 2.2 per cent of GDP for Canada but 2.6 per cent for Australia.
  • If catalytic benefits through tourism are included, the GDP contribution rises to 2.8 per cent for Canada versus 6.1 per cent for Australia.

“Where Canada wins hands down over Australia [is on] aviation’s contribution to taxes,” Tyler added. “It is about 19 per cent higher in Canada, excluding the impact of domestic taxes on fuel.”

It is unlikely Tyler considered the impact of other Canadian aviation anomalies such as the Air Canada Participation Act. What clear-headed airline executive could? The Act is an obscure 25-year-old piece of legislation to soften the blow of privatizing Air Canada by promising to keep the airline’s headquarters anchored in Montreal while setting specific levels of maintenance services in Montreal, Mississauga and Winnipeg.

The Act was written before a low-cost tsunami crashed over legacy airlines, and before the rise of lower-cost, global heavy maintenance service centres. That it has become a hot button topic following the collapse of Aveos Fleet Performance is further evidence why Canadian air transport is still in need of the big fix.

The federal government has absolved itself of blame for the Aveos collapse. That may be true on the surface, but is it entirely accurate? It is likely that the Act was part of due diligence when Air Canada first sold more than 70 per cent of Air Canada Technical Services to U.S.-based investment bankers, with no MRO experience among them. It would also explain why one airline was responsible for 85 per cent of Aveos work in Canada, and how the MRO became vulnerable because cash-strapped Air Canada is trying to trim its annual heavy maintenance bill by moving some work elsewhere.

Likewise, it is unfortunate that Air Canada employees continue to draw lines across shifting sands. It is easy to understand their frustration. Whereas WestJet management and employees have built a workplace culture from a blank sheet of paper, Air Canada employees have gone in reverse, continually parceling up gains made in a different era. The fact that Air Canada is still a respected brand is largely due to the frontline professionalism of its employees. Here, too, we appear to have reached a breaking point.
 
There are some who believe that Air Canada’s planned low-cost carrier – let’s call it son of Tango – will solve a large chunk of the airline’s labour woes. It might deliver short-term relief, but much less over the long term, especially when the low-cost employees peer out over the tarmac at the better pay and benefits – although diminished from years past – of the mainline carrier.

In the meantime, Canadians are running out of patience. According to the Canadian Airports Council, an Ottawa-based industry group, 4.8 million passengers are fleeing to U.S. border airports to travel, driven out by taxes and fees, and higher ticket prices. That is up from 2.2 million a few years ago.

History is repeating itself. In the 1930s, a national airline jumped to the top of the government's priority pile after too many Canadians were taking a pass on the railways and using U.S. airlines to travel long distances.

Sometimes the savings are so deep that families will endure the frustration of a four-hour drive each way, a border crossing thick with vehicles, airport parking and the cost of a hotel room to pocket the difference.

The question should not be why they do it, but what we can do to bring them back to our airports.

An extra 4.8 million passengers would draw Canada almost even with Australia for annual passengers carried. For now at least, the gap may widen. Australians can’t hop in the car and drive to New Zealand for cheaper fares. But just as Air Canada can outsource pieces of its MRO, so Canadians have a choice.