Nationalize the Air line Industry
                                   by Joe Flexer

The labour movement and the NDP  should stop relying on airline barons or
potential barons to solve the crisis in the Canada's airline industry. The
labour movement should unite with the NDP and compel the government to
nationalize both Air Canada and Canadian Airlines and create a single
publicly owned integrated airline under democratic management. This is the
only structure which would provide the Canadian economy and the people of
Canada with their air transport needs at the lowest price consistent with
quality service while at the same time defending the interests of the many
thousands of organized airline workers. In place of the market solution to
the airline crisis the workers movement must fight for a socialist solution. 

The Crisis of the Airline Industry

The crisis of the airline industry in Canada is not new. It began with the
deregulation of the airline industry in 1987 and the privatization of Air
Canadian 1988.  To that point Air Canada had been a well running and
profitable publicly owned corporation. It was privatized by the Mulrooney
government in keeping with neo liberal doctrine that decreed the
privatization of all government enterprise that produced a profit. This
amounted to private appropriation of public assets. Sort of  legalized theft
on a grand scale.  This publicly owned airline had shown a profit twenty one
years out of the twenty eight years before privatization. The seven years of
accumulated  losses amounted to $150 million which, considering the scope of
the enterprise and the difficulty of developing from the ground up air
transportation in a huge and sparsely populated country like Canada was a
paltry sum. 

In the nine years since there have been a number of junctures where crisis
measures were required to respond to  financial chaos in the industry.
Except for the 1994 AMR bailout and 1988 debt write off at the point of
privatization  the bulk of the infusions of capital needed to prevent
collapse have been at the expense of wage and benefit concessions wrung from
airline workers under the threat of massive job losses. In recompense for
subsidizing these two corporations with reduced wages and benefits the
airline workers are now faced with a new and possibly terminal crisis of at
least one of their major employers while the other is driving to yet further
degrade their conditions of work.

In financial terms to December 31, 1998 the two major airlines Air Canada
and Canadian have amassed an accumulated debt of $3.9 billion.  Today for
all practical purposes Canadian Airlines is bankrupt and unless some
solution is found the airline will collapse and be grounded within a year at
the most. Since deregulation and privatization neither Air Canada nor
Canadian Airlines have yet to "break even".  In recent years (mainly 1997)
Air Canada has shown a profit but this still did not offset large losses
earlier in the decade and is not by any measure an indication of good health. 

The bottom line is that the airline industry today is facing economic
collapse, rising fares and declining quality of service and the fear of the
loss of many thousands of relatively well paying jobs. Solutions must be
found. Recognizing this the Liberal government has established the legal
framework which allows the two major airlines to discuss possible solutions
and has expressed its willingness to consider making legislative changes in
order to facilitate this. 
How Did All This Happen. 

According to prevailing neo-liberal ideology the "free market" produces the
best services and products possible at the lowest price possible. This view
has little credibility in virtually all sectors of the economy but least of
all in the Canadian airline sector.  Since deregulation and privatization
what the CAW in its brief to government called "A War With No Winners" broke
out.  

This war between Air Canada and Canadian Airlines has left both  been
weakened by competition aimed at hurting each other. Both airlines match
each other's posted fares, dollar for dollar. Both airlines match each
other's departures, minute for minute. Both airlines fly half-empty planes
to the same destinations, or must offer deep discounts to fill their excess
seats. The result is that the whole industry has been weakened by years of
wasteful duplication. Like a punch-drunk heavyweight boxer at the end of the
15th round, the supposed "winner" of this irrational battle Air Canada. is
left staggering and financially wobbly while the loser Canadian is going
down for the count. 

Market "Solutions" 

The result of this war forced the federal government to finally consider
restructuring the industry. In doing this the government faces a number of
constraints. First it cannot, under existing law sanction the creation of a
private monopoly.  Second for strategic reasons the government is committed
to prevent foreign domination of this key industry. It must also continue to
maintain the 10% equity limit for any one stockholder established at the
time of privatization. Finally the government being bounded by neo-liberal
doctrine must come up with a market solution that satisfies these restraints. 

To this point two major proposals for restructuring have emerged.  The first
was the bid by the Onex corporation led by the scavenger capitalist Jerry
Schwartz.  Their objective was to buy both Air Canada and Canadian on the
cheap, downsize and merge the two airlines and end up with a largely foreign
owned monopoly grip on the Canadian airline industry. This bid was
ultimately declared illegal by the Quebec Superior court on the grounds that
the Onex bid violated the federal law passed at the time of the
privatization of Air Canada limiting equity ownership by any single person
or company to no more that 10%. At the time of writing this option is dead. 

Today the front running option remaining is the Air Canada solution. This
involves implementing the long standing offer by Air Canada to buy out
Canadian and thereby achieve a monopoly grip on the Canadian airline
industry.  Air Canada has included in its proposal the creation of a "no
frills" low cost airline out of Hamilton.  

Shorn of its ambiguities and evasions such as one airline operating as
separate divisions the likely outcome will be a new Air Canada holding a
private monopoly position in the Canadian air transport industry. This being
the case the federal government will be constrained to find some formula to
regulate the industry in order to prevent price gouging and the other abuses
that flow from monopoly. Experience has shown that regulation won't stand up
to the power of a merged national airline to manage the market at the
expense of travelers and other users. The notion that monitoring by
Transport Canada or some other government agency can contain fares of a
merged airline doesn't take into account the ability of powerful players to
manipulate regulations. 

The same holds true for proposals to have Transport Canada regulate the
capacity of the two existing airlines as an alternative to a merger in order
to eliminate excess capacity and duplications. Such a degree of regulation
could only be made effective by burrowing deep into the operations of both
company's operations and developing of information and imposing conditions
accordingly. This is bound to be rejected since it will be described by the
business press and parliament as bureaucratic and pigheaded interference in
the private affairs of the companies.    

The Case For Public Ownership

The experience of the privatization of the Canadian airline industry has
shown clearly that an unregulated "free market" structure can only create
crisis. The only real option short of opening the industry to unrestricted
foreign ownership is the creation of one single Canadian owned air carrier.
The reasons for this are varied but have to do with the huge geography of
Canada combined with its sparse population. It was for this reason that the
only way that a domestically controlled air transport industry was created
in Canada through a crown corporation. This policy was successful but came
to an end when the Mulroney government privatized the industry leading to
the present crisis. 

It is possible therefore to make a business case for one single publicly
owned Canadian airline. The fact that this solution has not been raised in
the public domain attests to the total hegemony of neo-liberal dogma. The
most important element in air transport is the passenger load factor - the
use of capacity. A domestic monopoly, with control over all flights and
equipment allows for optimum use of capacity, by matching capacity to
demand. It also allows for the best distribution of flight times and the
economies of scale of larger aircraft. This translates into the lowest
possible fares and the most convenient service. 

Beyond this "business case" as socialists we put forward a number of
considerations beyond ecnomic efficiency. When capitalists invest in an
industry their goal is the maximization of profit. Where the demands of
profitability contradict social considerations such as access to remote
locations or the provision of adequate wages and working conditions for
those working in the industry the demands of profit must prevail. 

Socially owned enterprise on the other hand can set as its goal the
provision of the best service at the lowest cost possible. Such enterprise
is not compelled to produce a profit but needs only to break even so as not
to burden the public purse. It can also plan to make a profit but such
profit reverts to the public treasury and can therefore serve social goals
beyond its own narrow purview. 

Finally, socially owned  enterprises can be democraticaly administered and
thereby open the way to giving full scope to the skills and creativity of
the thousands of working people who make the enterprise go. 


How To Get There

In the prevailing ideological and political climate the nationalization of
the air transport industry might seem as a radical and unrealizable goal. We
reject this view.  What is required is the political will to convince
working people of the efficacy of this solution and to mobilize them in
struggle for its achievement. The working people of Canada have created two
institutions, the NDP and the labour movement that between them have in
potential the power to bring this solution to fruition. 

The nationalization of the Canadian air transport industry is a political
project. The NDP and the trade union leadership must develop a plan to raise
the issue in the public domain and to mobilize the mass base of the union
movement including of course the three major unions that organize airline
workers. Until today the NDP has had little to say on the question of the
restructuring of the industry. Their pronouncements have been limited to
suggesting that the federal government buy a minority equity in the
restructured air line industry. The trade unions are demanding re-regulation
of a two air line industry. For the reasons we have outlined above this is
not a realistic proposition. We want more than a seat at the table. 

What is required is reconsideration of these failing policies and the
launching of a combined campaign of parliamentary and mass action to achieve
this goal. Failing this we can be sure that the future holds a continuing
crisis for the industry and the many thousands of workers employed in this
industry. 
<END>
    


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