RE:RE:RE:RE:So much for a bailout firstworld wrote: AC is a perpetual subsidy model simply as a result of govt protectionist policy prohibiting all foreign competition causing people to pay up to 1000% more for similar flight elsewhere. There are no poor AC employees all way over paid, poor service, poor to look at. Time to go bankrupt, clean out the unions, open up the sky's to all competition. I certainly don't want my tax dollars supporting this perpetual welfare case any longer.
Good day firstworld;
Let me just explain a few things to you. For others that already know this story - yes, I know I'm simplifying and glossing over some details but I don't want to write a book here. I’m going from memory (because I’m not going to spend hours fact-checking) so if I’m off a little on the dollar amounts or years I ask your forbearance.
After the second world war countries around the word realized that having a national airline was a good thing and many were created or expanded. The Nordic countries, England, Canada and others around the world followed the same path. BOAC (which eventually became British Airways) Sabena, Swiss Air, Air Canada are examples. These airlines were a tool of their governments and were used for expanding trade, establishing rights and exerting influence. None of them were profitable but there were other benefits.
In the 80s it was decided to sell off Air Canada, the crown corporation, but the government didn’t want to completely give up control so it was sold under the ACPPA - the Air Canada Public Participation Act. This meant that Air Canada could be sold but had to maintain certain conditions; it had to maintain an aircraft maintenance base in Winnipeg, one in Malton (Pearson airport) and one in Montreal. It also had to remain fully bi-lingual and maintain it’s head office in Montreal.
The sales of the shares to the public resulted in 500 million dollars for the Federal government but the new company was hamstrung with almost crippling restrictions - 3 maintenance bases, head office in Montreal, complete bi-lingualism. I’m not a francophone, don’t know if you are and if this is important to you but what it means is that every Air Canada flight, every checkin desk, every cargo depot is serviced by bi-lingual staff. OK, you say, no big deal simply hire bi-lingual staff. Not so fast, every document, every staff training manual, every bit of signage, everything in the company is translated and available in english and french. All this means little to me but means a lot to francophones.
When Canadian collapsed in 2000 Air Canada “acquired” them. Did Air Canada want this? No, they did not. It was strongly encouraged by the federal government (you won’t find proof of this in the public record but it’s widely known in the industry). Now Air Canada had 50% more staff than they needed, financial obligations they didn’t anticipate and whole bunch of largely obsolete surplus aircraft. And then in 2001, 9/11. A huge drop-off in revenue and an insurmountable debt load. So AC entered CCAA. This was not due to mis-management. It was due to a combination of governmental interference and world events beyond their control.
AC eventually exited CCAA, without government assistance. In 2008 we had the global financial crisis which resulted in the one and only instance of Federal assistance. The Federal government gave AC a loan to help meet the pension contribution requirements. This was a loan at 12%. This loan was repaid, in full, with interest in about 18 months. Around the same time GM, Ford, Bombardier all received loans and they repaid zero. Yeah, that’s right, AC repaid their loan to the people of Canada. GM, Ford, Bombardier did not.
So, finally, with the background out of the way, on to your questions/comments.
Air Canada does not receive subsidies. Period. In fact the opposite is true. How much does the company pay in corporate tax, how much do the employees pay in income tax? Air Canada employs something like 40,000 Canadians. All those people are part of the economy. What would they do and were would those tax dollars come from without AC?
Yes, you and others like you, would rather save a few dollars by flying on Luthansa or Delta. The country would be poorer for it. You save a few hundred dollars on your airfare but everyone in the country pays more in taxes to offset the loss.
You wonder why airfare costs more (personally I think it’s competitive), well, why does your cellphone package cost more than in the USA, why does it cost more to buy a car, why does food cost more? It’s all the same reason. Canada is a relatively sparsely settled country and it just costs more to run (per capita).
You have no idea how much worse things would be travel-wise in Canada without AC. Yes, you could still travel internationally but every flight would be routed through Chicago, Denver or JFK - no direct flights. Yes, American airlines would provide some service but it would be through one of their hubs. Flights across Canada would double or triple in price because those flights are subsidized by AC’s international flights.
So, now, aside from the corporate tax revenue, the income tax revenue, the considerable employment for Canadians why do we need AC? Look at what’s going on today. Many people are suddenly aware of the hazards of relying on other countries for essential products and services. Running out of PPE, oops, it’s all made in China. Running out of essential medical supplies, oops, it all comes from India. There is a significant benefit to having a domestic source for essential material and service, even if it costs more. AC has done dozens of repatriation flights for citizens since the Covid crisis started. How many repatriation flights would Luthansa have done for us? Currently AC is running 150 cargo flights per week to maintain supplies of essential items. If AC wasn’t here how many flights a week do you think Delta would run for us?
Like it or not AC is essential. Aside from the fact that your slightly higher ticket price is more than offset by the tax revenue and other benefits AC provides the fact that a solid, reliable airline is available to call for nationalist needs is incalculable.
One more thing, you don’t want your tax dollars supporting AC? It’s the other way ‘round my friend, AC’s tax dollars are supporting you. Foreign airlines in Canada pay virtually nothing; some fuel, some catering, a few minimum wage employees. Almost every cent you pay on a foreign airline leaves the country. AC, on the other hand, brings in huge amounts of money, A significant portion of their revenue comes from sales in other countries. AC is importing money to Canada, other airlines would be exporting it.
My father-in-law has a cottage on a remote lake. There are maybe 20-30 cottages there and there’s one fellow who runs a seasonal convenience store. Nobody needs to buy supplies from this store and yet everyone does. Why? Because they want him there in case they need something. In the same way I support my local hardware store. I could drive to the big-box store and save a few bucks but I want him there in case I need something. AC is the same (although I think I’ve made the point that they are net-positive). You want them there for when you need them there.