by Ferry de Kerckhove
The Globe and Mail
April 13, 2016
Last year, at the Miami Global Forum, the brilliant director of Miami International Airport gave a typical American presentation about the success of his operations, noting that they were closing in on 100 airlines landing at the facility.
When I asked how he managed the so-called government-financed airlines of the Middle East – Qatar, Emirates, Etihad, renowned for their readiness to outspend competition – he replied: “Anyone is welcome, provided they abide by my rules.” At the time, Etihad was the only one landing in Miami.
On the other side of the continent, there is a province (British Columbia), a city (Vancouver) and an airport (Vancouver International) that is a treasure in style and convenience. But its Asian traffic is hampered by a Transport Canada policy that can be translated in a nutshell as: “What’s good for Air Canada is good for Canada.” What that means is that with international load factors (the average percentage occupancy of international flights in and out of Vancouver) above 90 per cent, there is clearly unfilled capacity.
The situation is essentially due to the restrictions on the number of airlines allowed to serve Vancouver and the number of flights a week allowed to those that miraculously managed to negotiate access to the Canadian market. Vancouver could absorb far more passenger traffic than it does now – a few years ago, the B.C. government came up with an air-services policy that called for the opening of the province’s skies.
The irony is that Emirates has a full-service terminal in Seattle, and that nearly half of the people travelling to Asia from Abbotsford, in the Lower Mainland, cross the border to fly from the United States. (There’s also a tiny airport across the border, in Bellingham, Wash., that siphons off U.S.-bound traffic from Vancouver.) Former trade minister Ed Fast, from Abbotsford, knew this well, and other airports in Canada suffer much the same fate.
The problem is the monopoly granted to Air Canada, which makes any intrusion by other airlines, particularly the Middle Eastern ones, a casus belli. I love Air Canada. It’s a great airline, better than any other North American airline. But growth in air traffic means more economic growth for Canada.
Why is this important for Bombardier? Very simple. We live in a cutthroat, competitive world. Bombardier needs to sell airplanes. If customers other than the government of Canada were to pick up the tab, buy Bombardier’s jets while increasing their allotment of flights to and from Canada, things could improve for Bombardier at far less cost to Ottawa.
Let’s not delude ourselves; our relationship with some of the big airlines is akin to a “blackmail” economy: You give me more access to your airports and I will buy more of your planes. Bombardier had always hoped that Qatar Airways would commit to buy a number of its C Series planes. Qatar bought a few business jets and started a waiting game, hoping for access to Vancouver and/or an increase in the number of its weekly flights elsewhere, such as Montreal.
But in Transport Canada’s view, strongly whispered in its ears by Air Canada, opening the flood gates to the “mercenary airlines” fed by their governments’ energy resources was tantamount to crucifying Air Canada.
But that’s not even true. Indeed, Emirates isn’t doing particularly well in Seattle. And providing Qatar or Emirates or Etihad flights to Vancouver – three a week to serve the Indian market, as the Chinese and Japanese are well served by Air Canada – is very unlikely to take a big chunk of Air Canada’s traffic. At the end of the day, more consumers might pay a bit less for their tickets and be tempted to travel more.
There is no question that the Middle Eastern airlines have a comparative advantage and that we should not cave completely to them. We should know, since for many years Air Canada was our own national company, government-owned and -subsidized.
Then, we had Canadian Airlines, which the government subsidized more and more as they were partially privatizing Air Canada. For a long time, this gave Canadian Airlines an unfair advantage – Air Canada struggled and for years after the collapse of Canadian Airlines, we had significant problems travelling on a national carrier to Latin America.
Maybe it’s time for a real bargaining session with the outside airlines at a time when air transport remains on the upswing. After all, we made peace with Brazil by having Air Canada buying both Embraer and Bombardier aircraft, and we all politely accepted the deal as fair trade.
Ferry de Kerckhove is a board member of the Conference of Defence Associations Institute.