Canadian Airline Deregulation and Privatization: Assessing Effects and Prospects

Ashley Thomson is a full librarian at Laurentian University and co-editor or co-author of nine books, most recently Margaret Atwood: A Reference Guide, 1988-2005.

Increasingly, Western governments, most prominently in the United States, are choosing to deregulate their domestic airline industries — that is, to make them more competitive. In this country, the federal government made a modest move in this direction on May 10, 1984, when the then Minister of Transportation, Lloyd Axworthy, loosened existing regulations (for example, by allowing airlines in Southern Canada unlimited freedom to reduce their prices).

The authors of this book, Gillen (from the Department of Economics, Wilfrid Laurier University) and Oum and Tretheway (both from Faculty of Commerce and Administration, University of British Columbia), pose two important questions: what will the Canadian air transport industry look like if the country continues to take steps towards deregulation, and what will it look like if it privatizes or dismembers the crown carrier, Air Canada?

The second question is integrally related to the first. In Canada the government air carrier has been used as an instrument of public policy for forty years. It has 60 percent of the domestic market. In the United States, where all air carriers are privately owned, no single firm has even 20 percent of the market (p.46). Were Air Canada allowed to retain its protected position in the market after complete deregulation, the intent of that policy would be undermined substantially.

The first 43 pages of this book contain an “Executive Summary” of its contents. Many readers will find this summary useful in grasping the authors’ main points, although their so-called “Main Report” will be perfectly comprehensible to the intelligent lay reader who understands a bit of mathematics and knows how to interpret the many tables and diagrams that appear.

Part One of the “Main Report” (pp.45-46) describes the existing airline industry in Canada and summarizes the history of federal regulation of the industry (beginning in 1938). This part continues with a look at four regulatory policy options available for the industry as a whole, as well as several options that could be pursued with respect to Air Canada. Part Two of the “Report” (pp.97-218), the guts of the book, uses existing Canadian data and then applies that data to the policy models that were developed in Part One. Part Three of the “Report” (pp.219-39) presents the authors’ conclusions with respect to the two problems they have addressed.

By resisting the temptation to transpose the conclusions of American studies to the (quite different) Canadian context and instead relying primarily on Canadian data, Canadian models, and knowledge of Canadian institutions, the authors have given us an important and interesting book. And even with Axworthy long gone, it is also very timely, since the new Conservative government appears interested in addressing the very issues discussed in it.