Turbulence: How Deregulation Destroyed Canada's Airlines

Paul G. Thomas is a professor of political science at the University of
Manitoba and the co-author of Canadian Public Administration:
Problematical Perspectives.

This lively book makes the case against deregulation of the Canadian
airline industries. There is no doubt in Skene’s mind that
deregulation has been bad for Canada; it has not meant more airplanes
flying to more places at lower prices.

The movement was led by businessmen who resented the costs and red tape
of regulation, economists who believed devoutly in competition, and
political scientists who argued that the national regulatory agency was
a captive of the airline industry. Contrary to the popular wisdom, it
was not the Mulroney Conservatives who launched the
deregulation/privatization movement; rather, it was Lloyd Axworthy and
the Liberal government in 1982.

On the basis mainly of media reports (industry representatives were
apparently not interviewed), Skene vividly portrays the subsequent
tumultuous decade in which regional carriers were gobbled up by Air
Canada and Canadian Airlines, merger talks between the two main carriers
failed, the debt loads of the two companies became crippling due to new
equipment purchases, and both federal and provincial governments rode in
to rescue them. Contrary to forecasts, deregulation did not, as of 1992,
provide a strong stimulus to airline travel. What Canadians were left
with was a duopoly in which the entrance of new carriers was dubious at
best.

Since this book appeared, the Liberal government has signed an “open
skies” deal with the United States, which allows their airlines to
compete in Canada. This move is an extension of the laissez-faire
philosophy that Skene attacks.