| Right direction, wrong words
By James Travers
MUCH OF the federal government's urgent and continuing problem
with Air Canada is painted on the tail.
Hard as he sometimes tries, Transport Minister David Collenette
can't overcome his nationalism or his political instincts long
enough to accept the airline for what it is and what it is not. Air
Canada is and has been for almost 15 years a private corporation
managed and now mismanaged by mostly American hired guns. It is not
a reliable vehicle for partisan political interests or an effective
instrument of public policy.
That willing suspension of disbelief explains why the minister
said the wrong thing this week while doing what was right.
Rearranging the facts, Collenette took time out from announcing a
$160-million airline aid package to claim Ottawa's policy was
working until the Sept. 11 attacks on the U.S.
Sure, he can claim the country's small, efficient airlines gained
market share in the 16 months since the federal government formally
allowed Air Canada to swallow failing Canadian Airlines. But he is
ignoring the harder truth that the national carrier was flying fast
toward financial ruin long before terrorism sent airlines into a
tailspin.
Those troubles - troubles that bring Air Canada to the brink of
bankruptcy, restructuring and bloodshed in the executive suite - are
linked to flawed political, financial and marketing decisions. Air
Canada's near-monopoly is hopelessly burdened by job and route
guarantees required by a federal government prepping for an
election, the crushing debt of two fragile companies and the suspect
strategy of chasing market share at the expense of profit.
The result is that Collenette is again standing at the same
dangerous intersection. If he moves toward a private sector
solution, even more jobs will be lost and smaller communities will
get only the service they can support. If he turns back toward
public investment or ownership, Air Canada's economic prospects will
be limited by political considerations, taxpayers will replace
shareholders as risk-takers and a recently freed industry will face
renewed regulation.
So far, Collenette is heading in the right direction. By
compensating all airlines, he is stabilizing a vital industry and at
least cooling the hot, unreasonable demands for a bailout that
flowed so swiftly and callously from the U.S. horrors.
Better still, Collenette is far more reticent than his caucus
colleagues about regaining control over what was once the people's
airline. Instead, he's hoping a white knight, perhaps one as
familiar as Onex Corp. boss and airline tycoon wannabe Gerry
Schwartz, will rescue Air Canada, taxpayers and his friend, the
Liberal transport minister. But those are baby steps toward an
elusive, distant destination. In only weeks and under relentless
pressure, Collenette must again restructure an industry that
routinely tests Ottawa's patience, purse and prudence.
The tools of that restructuring are familiar. Ottawa can and will
reduce ownership restrictions that limit domestic and offshore
investment as well as insulate senior management from the
consequences of its decisions.
To make the industry - and particularly its dominant player -
more viable, Ottawa is toying with indirect subsidies. Security,
navigation and fuel surcharge costs now carried by the airlines
could be absorbed by the federal government.
If transport's analysis is astute, those changes will attract new
investment to Air Canada and lead to the swift, unlamented departure
of its abrasive CEO, Robert Milton. Air Canada could then resume the
course Ottawa thought it set in merger negotiations.
Instead of launching a low-cost carrier or entering the charter
business, the company would focus on U.S., international and long
haul domestic routes. It might be forced to sell its regional
subsidiaries and it will certainly have to learn to live with
competition. Even that solution has pitfalls.
To survive and eventually thrive, Air Canada must shed debt,
workers and unprofitable routes.
Collenette and his cabinet colleagues can soften those blows with
judicious application of unemployment benefits and indirect
subsidies. But they can no longer live in the no-man's land between
private enterprise and public policy.
To continue squatting in that barren place, the transport
minister and this government would have to embrace the twin follies
of regulation and public investment. A better alternative is to
finally accept that the Maple Leaf on Air Canada's tail is less
important than the safe, timely and affordable delivery of a
valuable service.
James Travers is a national affairs columnist with The Toronto
Star.
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