Air Canada Sucks…?

by MaxPower

It has been three years since my definitive anecdotal proof that Air Canada does indeed suck. Many things have happened in the world since then, September 11th, the two most recent wars, a mini-recession and to my personal chagrin – more trips on Air Canada. I can’t avoid it and to be honest I must be a glutton for punishment because looking back on my June ’01 article I see that the experience I went through pales in comparison to my December ’01 Air Canada gong-show where I landed in Iqualuit and arrived at my destination six hours late.

Now everything is different. In ’01 I was on the cutting edge of criticism, many people still though Air Canada was a decent airline (compared to various US ones) and that the service just wasn’t that bad. Now in June ’04, bashing Air Canada is a national hobby, if not just for the customer service (which as far as I can tell hasn’t improved) but also for Air Canada’s appalling lack of business know-how. As most Canadians know – Air Canada is bankrupt, plum broke, and they gots no monies. Granted the macro-economic environment for airlines has been bad, what with rising fuel costs, SARS, terrorism and a general decline in the willingness of the public to shell out big dollars for a two hour plane ride. But whose fault is this? WestJet is making tons of cash flying people; even JetsGo seems to be making a go of it. It sure isn’t the flying public’s fault. They have been trapped in a quasi-monopolistic market and have had, in many cases, no choice but to hand over buckets of cash to AC.

Is it the government’s fault? Well, partially. They are the architects (or at least the keepers) of the ridiculous rules that prevents foreign ownership of domestic airlines and foreign airlines from flying between Canadian cities. I’d like to give the government a hand for not bailing Air Canada out with a huge injection of taxpayers’ money. Oh, you can bet the Liberals thought it over, but their recent flirtation with fiscal conservatism won out. Not so for the NDP. Those wacky socialists decided to say in a policy platform speech for the upcoming federal election that the NDP would have thrown loads of cash into ailing Air Canada. Ouch, not a good point when the Canadian electorate despises Air Canada with their fat-cat executives and unions. But to be fair to the NDP this must be a socialist knee-jerk reaction. Just like the conservative knee-jerk reaction is to cut taxes when something is wrong with something, the socialist reaction is the opposite. The NDP knows what can fix Air Canada? money! And not dirty dirty capitalist private investor money, but good publicly funded taxpayer money. That’s the stuff of business miracles.

Regardless, this brings me to the point that the current state of Air Canada can be placed solely at the feet of Air Canada executives and unions. April 1st, 2003, Air Canada files for bankruptcy and is ordered by a bankruptcy judge to cut costs. December 4th, 2003, Victor Li – a Hong Kong based businessman says he’ll pump $650 million into Air Canada for an equity stake. Key point here is that Li has Canadian citizenship so his money is ‘good’ according to government foreign ownership rules. A Hong Kong based business man who isn’t Canadian wouldn’t be able to put money into Air Canada because that is foreign money! Foreign money coming into Canada to save a Canadian company, perish the thought. That would be like Tim Horton’s being owned by Americans! Oh wait, that already happened when Wendy’s bought them. Oh well. Anyway, as part of the restructuring agreement Air Canada has to shed costs which have to come in the form of jobs and/or salary cuts at all levels. Middle-management was purged, services cut, frills banished and a low-cost mentality started to prevail. Then on April 2nd, 2004, Air Canada states they lost $1.87 billion in 2003. Li ended up walking away from the deal because of “union intransigence” and then some other investors stepped forwards with the cash – who said there was a sucker born every minute?

This is basically where we sit now, however, what really rankles is the executive’s and union’s action during this time. The Air Canada CEO, Robert Milton, is said in numerous reports to have been in line for a $20 million dollar bonus to get the company out of bankruptcy with the Li offer. That is insane; you get a bonus to get a company out of bankruptcy? You’re the executive who put them there to begin with, why should he get a bonus for that? And as for the unions, they have to realize flying is now a commodity, people are willing to put up with whatever to get to their destination cheaply, and there is barely any airline ‘loyalty’. When a business is selling a product or service which has been commoditized it must compete on cost. In this situation, the lowest cost producer will win. Air Canada can’t be the lowest cost producer with their unions, it is simply not possible. They have unionized staff checking passengers in. Think about it, these middle-aged employees have been with Air Canada for the last 15 – 20 years and are making good money to do something that the customer can do themselves in 30 seconds. I LOVE using the automated check in kiosks. Swipe your card, check your seat assignment, change seats if you want, enter the number of bags you’re carrying and print out your boarding pass. West Jet has 18 to 21 year olds doing this and it works just fine, why do you need unionized staff to do this job? The situation is the same with the stewards/esses. They hand out drinks and snacks, or at least they used to, and sorta kinda know what to do if the plane crashes. Many, many airlines around the world have shown this is the type of job for which you do not need to be highly skilled, just friendly and polite, the two things Air Canada stewards/esses lack.

Air Canada has a high cost structure because of incompetent management and petulant unions. They had a high cost structure before going bankrupt. They will have a high cost structure after they emerge from bankruptcy protection. Why not just let Air Canada die and start from scratch, without the current management and without the unions? Why, in this day and age, do we as Canadians feel a patriotic allegiance with our ‘flag carrying airline’? Would we be any less Canadian if we flew on an “Air Canada” that was owned by foreign investors? Tim Horton’s doesn’t seem to think so, playing on nationalistic jingoism to sell coffee and donuts when owned by an American firm.

I just checked. Air Canada still sucks.

MaxPower