Remarks of Michael Janigan
Executive Director/General Counsel
of the Public Interest Advocacy Centre (PIAC)
to the Ad Hoc Committee on Air Transportation
The Canadian Association of Airline Passengers is an ad hoc coalition of consumer and public interest organizations which has been assembled both to respond to the current merger discussions and to advance the interest of airline passengers in the operation of airline services in the future. The coalition was formed in part, because the public discussion was focusing on issues other than the concerns of ordinary airline passengers. These included the size of the ONEX offer, the job security of airline employees, the golden handshake for executives and the various legal and procedural maneuvering associated with the various merger proposals. This story has been unfortunately covered like a hockey game with Canadian consumers largely relegated to the role of spectators and the Competition Bureau referee banished to the penalty box while the opposing teams slug it out.
Some important points should be made:
1. The market for airline services exists independently of the two competing entities Air Canada and Canadian Airlines. These are not the Wright Brothers who have just discovered flight. These are companies driven by the interests of their shareholders to maximize return on their investment. It is up to public policymakers to devise the rules for the market that force the financial interests of these companies to align with the public and consumer interests.
To return to the hockey analogy, this is not a case where one team is to be cheered over the other. From the consumer standpoint, we must ask how will any new arrangements benefit consumers. Bad government policy making usually eventuates from the assumption that a particular business or company should be the focus of a policy, rather than ensuring the provision of a level playing field or appropriate industry wide regulation.
2. The commencement of the current crisis has left most non-insiders confused. How can the longstanding dismal financial performance of Canadian Airlines merit the extraordinary treatment provided by the Minister of Transport with the consent of the Minister of Industry under section 47 of the Canadian Transportation Act. If the financial health of a competitor warrants government intervention to suspend the operation of as fundamental a set of principles as the the Competition Act when does consumer dissatisfaction with pricing, quality of service, and safety merit comparably drastic government intervention.
3. Let us also make one thing perfectly clear: We are not seeing a proposal to migrate from a workably competitive airline market to an unregulated monopoly but rather the demise of a duopoly that provided intermittently successful competitive substitutes. While both major players responded with gusto and deep discounts when their market shares where threatened new market entrants such as Greyhound and Vista Air, pricing on high traffic routes such as Ottawa to Toronto has steadily increased almost 50% since the demise of those former market entrants. There is much anecdotal evidence suggesting an unacceptable level of market power possessed by the current players.
4. Longstanding safety and health concerns remain unaddressed without the market cachet or the government interest to bring them forward. Some of the organizational participants here today are better able to address these issues which should have particular resonance regardless of the outcome of the proposed merger.
Accordingly, we have set out in this initial effort entitled Airline Passenger Bill of Rights, some terms which we think are essential and should be part of the conditions of service of any airline. This document which is based upon, in part, the US Congressional model, and sets out minimum terms which most passengers would agree with as constituting standards of services which should be adhered to by airlines. Many of these standards must be government mandated as market forces may be either too slow or ineffective to allow implementation of important public concerns.
Returning to central theme. There are some pertinent analogies to be made with respect to the banking industry. Last year, the proposed mergers of the major banks obscured the central issues from the consumer standpoint: namely the need for enhanced minimum consumer protections and mandated accessibility to banking services. While the proposed bank mergers were likely to be unhelpful for competition in the long run, their disposition without implementation of consumer protection would not have represented any consumer triumph.
In this case, we have substantial consumer concerns that have not been addressed, on top of a contemplated cratering of the entire airline competition policy. To make matters worse, we have the temporary decoupling of the Competition Commissioner from the merger process.
We don’t need another solution brokered to secure shareholder investment. We need an environment where, yes investors can make a fair return but consumers are protected either through real competition or realistic effective regulation. I am far from certain we are now going down the right road.