Why protect airlines, not passengers?
Transport Minister Marc Garneau has made it clear that he considers his primary responsibility to be saving Canada’s airline industry, rather than protecting its customers.
The former astronaut- turned- politician said as much when he was asked about the airlines’ refusal to refund money to passengers, offering vouchers instead.
“I have a responsibility to make sure that when this pandemic is over, we still have an airline industry,” he replied. “I have said many times that I have enormous sympathy for those who would have preferred to have a cash refund in these difficult circumstances. It is far from being an ideal situation. … At the same time, if airlines had to immediately reimburse all cancelled tickets, it would have a devastating effect on the air sector.”
It’s a reasonable enough argument to make if you assume, as Garneau appears to, that the demise of Air Canada or Westjet would mark the end of air travel in Canada. It’s just that the assumption doesn’t hold.
Canada’s two biggest air carriers are both important entities that employ tens of thousands of workers. Calgary- based Westjet says it is laying off about half of its 14,000-person workforce, many of whom may never return. Montreal-based Air Canada plans to cut “approximately 50 to 60 per cent” of its 38,000 employees. Both signed on to Ottawa’s emergency wage subsidy scheme, but Air Canada subsequently concluded that drastic changes were needed if it was to survive the coronavirus pandemic.
Saving as many jobs as possible is obviously a crucial concern for the federal government. But it’s dubious at best to argue that it has to be done on the backs of the airlines’ customers. It’s also wrong to assume that the disappearance of any one company would be the end of the industry.
Plenty of Canadian carriers have come and gone from the skies without the apocalypse ensuing. Wardair, which was founded by Edmonton entrepreneur and Air Force pilot Max Ward, was once the country’s third- largest airline. It was eventually sold to Canadian Airlines, which for a time dominated Asian routes, and was itself bought up by Air Canada. For years, Air Canada went head-to-head with Canadian Pacific Airlines, which was headquartered in Vancouver, until it was bought by Pacific Western Airlines, the precursor of shorthaul Western- oriented firms that started small and grew, of which Westjet is the latest example.
Air Canada itself has been through years of roller-coaster fortunes. Once a Crown corporation favoured with special protections against rivals, it was privatized, faced bankruptcy, struggled back, suffered a second financial scare, found its feet again and, until COVID-19 came along, had been transformed into a stock market darling. It’s a record that reflects the fundamental uncertainty of a business that’s susceptible to shocks on many fronts: fuel prices, economic downturns, tourism shifts, international politics, not to mention accidents, the weather and the enmity of environmentalists who are irate at its heavy contributions to greenhouse gas emissions.
Yet for all their challenges, the airlines have been maintained by an inescapable reality: air travel is an essential service. Any time one carrier disappears, another pops up, driven by the simple fact of demand. There is no reason to assume that wouldn’t happen again, should one of Canada’s major firms fall victim to COVID-19. Maybe two companies would have to be merged into one. It wouldn’t be the end of the world. It’s happened many times in the past.
A bankrupt airline can’t be expected to refund tickets, but Air Canada hardly looks like it’s circling the drain. On Tuesday, it announced that it had successfully raised $ 1.6 billion through a sale of shares and bonds. The offering brought its cash reserves to $ 10 billion, which, according to chief financial officer Michael Rousseau, “will allow us to keep our strong relative position and better manage debt leverage and risk as government restrictions are lifted and the market recovers.” The airline’s ability to easily raise cash, he said, “is a strong endorsement of the strength of our franchise.”
So why is Garneau fretting about survival? One Bay Street analyst said Air Canada didn’t even need the extra money, but saw the opportunity to provide a “strong cushion” on top of its existing cash pile. Even without the extra funds — which would pay off a big chunk of the $2.6 billion that passenger rights advocate Gabor Lukacs says is owed to customers in the form of refunds — there’s no reason to treat passengers as if the virus was their fault.
Garneau’s Liberals have been throwing money around like treats at a dog show: $ 9 billion just so students can have summer jobs, $2.5 billion to seniors whether they need it or not, $ 470 million for “fish harvesters.” Another billion or two is nothing to these people, who are already shrugging off a deficit in the $ 270- billion range.
Surely a company with $ 10 billion in the bank could handle the payments on a long- term, low- interest loan targeted to refunds. Plenty of passengers, given the choice, might opt to keep their vouchers, especially if offered a little sweetener: a suspension of the usual baggage fee, access to the snobby business- class lounge or maybe an on- board sandwich without the usual spine- chilling mark-up.
Passengers have borne the brunt of cramped seating, high fees and crowded terminals from a fiercely competitive industry. The passenger bill of rights introduced a year ago has been a bust. The Canadian Transportation Agency has waffled hopelessly throughout the pandemic. Passengers didn’t cause the crisis. It would be nice to treat them fairly for a change.
AIR CANADA HARDLY LOOKS LIKE IT’S CIRCLING THE DRAIN.