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Renationalize Canada’s Airlines

The pandemic has exposed some terminal defects in Canada’s deregulated, privately owned airline industry. Nationalization is the best way to make air travel viable, environmentally sustainable, and in tune with social needs.

The federal government has already given Air Canada $400 million in wage subsidies — more than any other publicly traded company in the country. It makes little sense for the government to keep pouring money into the airline when it has no public equity stake. (Wikimedia Commons)

Canada’s flag carrier, Air Canada, is cutting most of its flights to locations across Atlantic Canada from major cities like Toronto and Ottawa. WestJet, Air Canada’s main competitor, had already announced a cut of 80 percent to its Atlantic Canada flights back in October.

At first glance, airlines in Canada may seem to be victims of a post-pandemic decline in business. Cutting flights to the Atlantic provinces appears to make sense, as they have some of the smallest populations in the country. But Air Canada’s current crisis has much deeper roots, going back to its privatization in 1988.

Since many people from Atlantic Canada travel west to find work, air travel is of vital importance to the region’s livelihood. The Atlantic provinces have the highest proportion of seasonal workers in Canada. If an airline cannot provide travel where it’s needed, what public function does it really serve?

Myths of Deregulation

The United States deregulated its airlines in the late 1970s, in a harbinger of the neoliberal restructuring to come. Canada followed suit the following decade. For all the hype, by the 1990s, it was already clear that airline deregulation was not providing the cost savings and improved service that its proponents claimed it would.

After deregulation in the United States, airlines either went out of business or merged. Those that survived often spent periods in bankruptcy protection. There was a similar situation north of the border: Air Canada went into bankruptcy protection in 2003, soon after the takeover of its main rival, Canadian Airlines International, in 2000.

After the airline’s return to solvency, it again set about absorbing a competitor, buying up Air Transat in December 2020. The tendency of deregulated airlines toward consolidation gives the lie to claims that free-market competition will guard against the emergence of monopoly power.

In the wild west of the unregulated airline industry, workers feel the ups and downs most acutely. In 2003–4, the unions representing Air Canada workers agreed to a new concessionary contract so that the company could exit bankruptcy protection. This contract, which saved the airline, required its workers to accept layoffs, wage reductions, increased contributions to benefit plans, and two-tiered wage structures.

These worker concessions put the airline in the black again for a few years. However, the global recession of the late 2000s led to tense bargaining rounds from 2010 to 2012. Federal back-to-work legislation in 2011 provoked labor unrest that led to a wildcat strike by ground crew and pilot sick-outs.

Under Canada’s industrial relations system, wildcat and planned sick-outs can lead to stiff financial penalties for workers and their unions. In Air Canada’s next bargaining round, arbitration dealt with the residual bitterness from 2011–12. In 2015, Air Canada workers finally won some improvements when the airline, keen to secure some labor peace, offered maintenance crew and flight attendants decade-long contracts.

Pandemic Aviation

The global pandemic and the resulting economic crisis have come halfway through the most recent Air Canada contract and will no doubt prompt the airline to renegotiate. Even with vaccines starting to roll out, it could take many months for something like normality to return, and even longer for air travel to pick up again.

In May 2020, at the beginning of the pandemic, the airline laid off more than twenty thousand of its employees. The Air Canada Pilots Association has already agreed to changes in their collective agreement, allowing the company to expand its number of cargo flights to make up for the drop in passenger demand. And as cases across Canada have soared to new highs over the winter months, the company has hired social media influencers to promote traveling on Air Canada, despite government warnings to avoid all nonessential travel. This is not the behavior of a company with the public’s best interest in mind.

Canadian airlines have asked for government aid to tide them through the crisis. The federal government has already given Air Canada $400 million in wage subsidies — more than any other publicly traded company in the country. It makes little sense for the government to keep pouring money into the airline when it has no public equity stake — especially in light of the industry’s volatile history since deregulation.

Government ministers justified their intervention in Air Canada’s 2010–12 labor disputes by claiming that they had to keep planes flying for the sake of the economy. They’re right about one thing at least: air travel is an essential service in the modern world. That’s exactly why airlines should be publicly owned.

Nationalize the Skies

The aviation industry accounts for an estimated 5 percent of carbon emissions driving climate change. Over the next twenty years, the number of air passengers is expected to double worldwide, mainly fueled by an increase in Asia. In the absence of a serious attempt to create synthetic fuels, the amount of oil that airlines consume is only going to increase.

The airlines themselves know this perfectly well. German airlines have asked for more funding to be devoted to research on synthetic jet fuels, to be funded through increased taxation on tickets. While this may seem like a reasonable idea, it also reveals that the private sector is unable to invest in green technologies itself, as the initial development cost is too great for it to bear.

The cost of developing synthetic fuels and batteries and the airline industry’s boom-and-bust cycle both suggest that private ownership of airlines is a losing proposition. Propping up the industry in its current form will require major ongoing public subsidies. Without an overhaul, airlines will continue to treat their workers poorly and pump out carbon emissions while failing to serve communities like Atlantic Canada.

Air Canada’s ground crew union, the International Association of Machinists and Aerospace Workers, is now arguing for the company to be renationalized. They insist that the airline must provide access to air travel for all Canadian communities in return for the public money that is keeping it afloat. The union is right: with austerity measures looming in the wake of the pandemic, there’s a pressing need for change. Canada must take its flag carrier back into public ownership and reregulate its airline industry.