Air Canada says it is preparing for an “increasingly likely” strike or lockout as talks with its pilots union show no signs of a deal. The possibility of the country’s largest airliner shutting down flights to more than 110,000 passengers a day comes just three months after a strike at WestJet, the smaller of Canada’s domestic duopoly, stranded thousands across the country. This morning, we look to the skies and wonder: Why don’t we have more choice? But first:
In the news
Tapped: In a move to calm caucus nerves, the Liberals announced that former central banker Mark Carney will be taking on a formal role in the party as chair of a Leader’s Task Force on Economic Growth.
Trapped: The European Union is caught between Chinese and American growth and is in dire need of investment, Mario Draghi warns.
Sapped: Northvolt AB, the Swedish battery maker building a $7-billion factory in Quebec, said it will shrink its operations in Europe and cut jobs as a slowdown in electric-vehicle demand forces the company to rethink its plans.
Happening today
- Bank of Canada Governor Tiff Macklem addresses the Canada-United Kingdom Chamber of Commerce in London on global trade and investment.
- Earnings include Montreal-based DavidsTea, Petco and Gamestop Corp.
- The U.S. presidential debate is tonight. Are you watching? E-mail me: cws@globeandmail.com
In focus
Two airlines, 80 per cent of Canada’s market share
A work stoppage at Air Canada is estimated to affect about 110,000 passengers daily and cause widespread disruptions.DARRYL DYCK/The Canadian Press
First, the news at a glance:
Air Canada said a 72-hour strike or lockout notice could be issued as early as Sept. 15. The airline would begin winding down operations, a process that would take place gradually over three days.
- Aircraft groundings for some foreign travel and sun destinations will begin as early as Sept. 13, to avoid leaving customers, crew and planes stranded.
- The union voted overwhelmingly in August to approve a strike mandate. Air Canada and the Air Line Pilots Association entered into a mandated three-week cooling-off period on Aug. 27, during which the union cannot go on strike.
- Air Canada and its low-cost subsidiary, Air Canada Rouge, will be affected if a strike occurs.
- You can follow the latest developments for travellers here.
Why we don’t see more airliners taking off in Canada
If I wanted to fly roundtrip this week from Toronto to my hometown of Fredericton, the cheapest options available to me (ranging in price from about $1,050 to $1,200) are from Air Transat, Porter and Air Canada.
They’re also my only options. For that price, I could make two round trips to Punta Cana and have enough left over for a few mamajuanas.
How is it possible that consumers in this country have so little choice? It’s hardly a new question, but given we’ve already seen thousands of Canadians stranded by a strike at WestJet, the country’s only other major airline, it’s worth wondering why it’s still a question at all.
I spoke with transportation reporter Eric Atkins about the forces at play keeping the competition away.
Why don’t we have more choice in Canada?
It’s hard to crack the duopoly of Air Canada and WestJet. But cutthroat competition, high airport costs and government fees also play a role. So airport improvement fees, which passengers pay, they’re like $35; at some airports, $40. So, if you’re a family of four flying from Toronto to Montreal, that’s $160 going to the airport right there. There’s not much left for an airline to charge.
So American carriers won’t come here. Most small, cheap American carriers, like Frontier Airlines and Southwest, won’t fly here because they can’t charge a $40 fare if, you know, $160 is going to the airport, plus other stuff too. Like, it’s like $25 to go through customs per passenger. There are so many fees.
Why are there so many fees? What do they pay for?
Canada has a user-pay system, which means tax dollars don’t go toward paying for upgrades the airports want to make. That makes sense if you don’t fly a lot and don’t want to see your tax money going toward new glass ceilings or whatever. Every now and then, the federal government gives airlines or airports grants to do one-offs like, “Hey, upgrade your security system,” or “Here’s some money to do that runway.” But generally it’s a user-pay system, and it’s kind of a unique model in the world.
So, I’m guessing the U.S. model is different. And is theirs a more common approach?
In the U.S., the airports are mostly state or municipally owned, so they’re part of the tax system. They’re supported by the tax dollars.
In Britain and other European countries, some are allowed to get private investors. They’ll own a piece of Heathrow and Charles de Gaulle, and so they can raise money that way so they don’t have to charge $40 every time you walk on a plane. They have investors to help them raise debt to pay for things. So theirs is a kind of a hybrid. Most comparable economies, in fact, do draw from taxpayer funding.
How does geography play a role, apart from the funding models?
Canada’s a big country with not many people compared with the U.S., meaning fewer consumers. Fewer consumers spread over long distances. The low-cost carrier model is partly based on short hops, but there aren’t many short hops in Canada to do. In Europe, there are all kinds of smaller, cheaper airlines that do London to Paris, back and forth, like one hour up, one hour down. The distance between Toronto, Calgary, Vancouver, Edmonton – not so short.
So the low-cost model doesn’t work in that respect, but it also doesn’t work because we block airlines from coming into Canada to do point to point flight here. They can fly in and fly out, but nothing strictly domestic.
This was put in place to protect Canada’s airline industry but ...
... limits competition. Yeah. But the Competition Bureau is actually reviewing that, which would be interesting. Australia allows foreign ownership – you can be King Canada and own 51 per cent – but the government gets to tell you which airports to serve. So you could set up an Australian airline and you can fly within the country, but they tell you not to fly between Perth and Sydney, say. There’s enough airlines there.
Charted
Fertile valley, unfruitful future
In B.C.’s Okanagan Valley, apple growers are struggling to keep pace with big-scale fruit farming. Inflation and soaring production costs threaten the future of the fruit business in the valley, Kate Helmore reports.
Morning markets
Global markets drifted ahead of U.S. inflation data tomorrow that could influence the size of an expected Federal Reserve interest rate cut next week, while concerns about a faltering Chinese economy dampened the market mood. Wall Street futures were little changed while TSX futures pointed lower as crude prices sank.
Overseas, the pan-European STOXX 600 was little changed in morning trading. Britain’s FTSE 100 declined 0.54 per cent, Germany’s DAX dipped 0.3 per cent and France’s CAC 40 rose 0.23 per cent.
In Asia, Japan’s Nikkei closed 0.16 per cent lower, while Hong Kong’s Hang Seng rose 0.22 per cent.
The Canadian dollar traded at 73.70 U.S. cents.