Is Conservative Party of Canada really a party full of Free Marketers?

“The Canadian government is prepared to introduce legislation to end a strike at Air Canada because of the serious effect it can have on the economy, Finance Minister Jim Flaherty said Tuesday.

Labour Minister Lisa Raitt plans to give notice Tuesday night of back-to-work legislation, Mr. Flaherty said. This does not mean the strike will end immediately, but it gives the government the ability to put through a bill quickly when it deems it appropriate.”

“Ottawa threatens to force Air Canada employees back to work”, Reuters (Ottawa), Globe and Mail.com, Jun. 14, 2011 3:46PM EDT

In 1988, the Government of Brian Mulroney shook up the Canadian Airline Industry. Instead of having an airline industry that had private and public actors, the Canadian Government noted that it would withdraw from active, day-to-day participation within the industry.  Consequently, Air Canada, airports and the other public actors were to be turned into private sector corporations.  De Havilland Aircraft was privatized and eventually became a part of Bombadier.  NAV Canada became a non-share capital, not-for-profit corporation and was allowed to purchase the land and assets of the civil air navigation system from the federal government.

At the time, this change was quite controversial. Air Canada and others argued against it. In fact, the only reason why the Mulorney government was able to push ahead with the move was because of its large election win and the extraordinary appointment of a large number of Senators in 1988. To see the debate, one can look to articles in magazines and journals like Canadian Public Policy. Articles like “Privatization of Air Canada: Why It Is Necessary in a Deregulated Environment”, written in 1989 by David W. Gillen, Tae Hoon Oum and Michael W. Tretheway, documented the battle. In the end, the industry was privatized. This meant that the Federal Government was supposed to provide the ‘rules of the road.’ Or put differently, the Feds were only allowed to regulate airlines.

This means that the Government of Canada should no longer be responsible for the management of flights from Vancouver to Toronto. The federal government should no longer be responsible for the operation of airports. The Government of Canada is supposed to be accountable for ensuring that airline companies preform their necessary flight and safety inspections. So the mundane job of setting rules about lifejacket standards was just one of the things that the federal government was supposed to handle.

The Feds are responsible for ensuring that planes, pilots and crews are following the rules of the sky; just as provincial officials and police ensure that drivers are licensed and follow the rules of the road. This is why I am finding it odd that a Conservative Labour Minister and the Conservative Finance Minister are calling for back to work Legislation. Shouldn’t two private market actors be allowed to settle a labour dispute?

This is what is happening at Air Canada. Air Canada, a private company traded on the Toronto Stock Exchange, is having a problem with it’s union. It will be argued here that for over twenty years, Canadians were told that we should increase the use of the free market within our society. If this aim is true, the Canadian Government should not get involved.

Firstly, the employees of Air Canada were not disrupting Air Canada’s operations. Airline Spokeswoman Angela Mah indicated on the first day of the labour action, there were no flight cancellations. In fact, many of the delays were due to other employees who had trouble crossing picket lines. Much of this was due to the fact that Air Canada took steps to minimize the labour disruption. Like a good company, Air Canada warned its customers of the potential strike action and asked its customers to get to the airport earlier than they would otherwise be used to. Furthermore, Air Canada deployed 1,700 of its managers to airports across Canada to take the reins at check-in and ticketing desks, and diverted customer calls to centres in the United States. Their strategy was so strong that National Bank Financial analyst Cameron Doerksen said, “It sounds like, so far, operations have not been overly disrupted.” So it was very farfetched to argue that the Government was preventing economic harm by legislating private sector employees back to work.

The second argument against the back to work legislation was its speed. At the federal level, a number of agencies have unions. So the question is how do essential services provided by a government continue during a work stoppage. In Canada, different levels of government have designated that some unions have to provide or continue some form of service even during a strike. The Canada Labour Code, for example, ensures some federal services like telecommunications, railways, banks, ports and national security are staffed during a strike action. While, the Public Service Labour Relations Act designates which federal public employees will continue providing service in the event of a strike or work to rule campaign. Air Canada’s Unions do not have any such restrictions. Consequently, why should the federal government move that quickly to end a strike? In essence, the Federal Government has indicated that it, and not the economic actors like Air Canada or its union, should determine the way problems or conditions are resolved.

What is worse is that the Federal Government is not consistent. The Federal Government acted to end the Air Canada strike 15 hours after it had started. However, it allowed the Canada Post Lock-Out to go on for 10 days. Furthermore, let us not forget that the “lock-out” occurred after 12 days of rotating strikes. One could easily argue that 22 days of mail and labour disruption had an effect on the economy. People had to either not receive packages or pay three times as much to have a private sector company deliver it. Pension cheques were not received, companies did not receive payment for services rendered and customers did not receive bills. If anything, the Canada Post action caused more disruption. So it is confusing to understand why the Harper Government moved on the Air Canada first. That is unless the Harper Government’s reactions were driven more by political concerns than economic concerns.

Lastly, the Canadian Airline market is competitive. Customers could have easily dealt with a labour disturbance. One can see that Air Canada does not have a monopoly on travel to the US. As the Competition Bureau pointed out, in 2009, Air Canada held an estimated 35 per cent of Canada’s total scheduled air market with the United States, followed by United Continental’s 20-per-cent share. WestJet Airlines Ltd. held about 13 per cent of the market; while American Airlines Inc. had roughly 10 per cent. Delta Air Lines Inc. and US Airways Group Inc. have smaller slices of the market.

Much the same is true on the domestic side. Air Canada has dropped from its market high of 77% market share in 2000. At present, Air Canada controls only 55% of the domestic air space. The rest is held by Westjet (38%) and others (7%).  The truth is that while a labour disruption would have been a difficulty, it hardly required government intervention within 15 hours of the strike being called.

So this bears a set of questions. Why did the government get involved without a clear risk to the economy? Why did the government intervene in a private sector labour dispute? What was to be gained if other players could have taken up some, if not all of the slack? The truth of the matter is that no service disruption was evident because WestJet, Air Canada and a number of other players planned for it. With all of this being said, I think it is clear that the government actions were more ego driven than market driven. This is why the present Conservative Government is not a government which is dedicated to market oriented solutions.

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