With Air Canada’s negotiations with the flight attendants’ union seemingly going nowhere, and the possibility of a strike starting Saturday, tens of thousands of Canadian travelers face being stranded during their summer vacations. Ian Lee, a professor at the Sprott School of Business, breaks down how the lack of industry competition led to this impasse, the likelihood the Canadian government allows Air Canada flight attendants to strike, and whether there will be mass cancellations of flights as a result.
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Program Transcript
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RUDYARD GRIFFITHS: Air Canada could be headed for a crash landing as soon as this Saturday, with all of its air attendance going out on strike. What does this mean for Canadians’ busy summer plans during this month of August, and what remains of their summer vacations. To help explain it all and what could happen next, a real pleasure to welcome on Hub Hits, Ian lee of the Sprott School of Business. Ian, great to be in conversation with you.
IAN LEE: My pleasure Rudyard.
RUDYARD GRIFFITHS: Ian, you’ve written and analysed these types of big union disputes in the past. What do you think happens between now and Saturday? I think the 64 billion dollar question is, will the government step in here and legislate these workers back to their jobs, staving off the possibility of the shutdown of our largest carrier as early as this Saturday?
IAN LEE: Rudyard, I do believe they will. I’m not predicting they’ll do it on Saturday, but they’ll do a deal quite quickly. And the reason I say that is I published an article probably 15 years ago now, called striking out. And this is about the time when the Harper government was legislating back. It was striking Air Canada workers, actually. And there were all kinds of people in the Union movements, and I am unionised, by the way, at Carleton University were saying unprecedented has never been done before. You know, terrible, terrible. And I knew this was absolutely bogus, because I’m old enough to remember all the times that cup W were legislated back to work in the 70s and 80s, and they weren’t the only ones. So I went to the library of Parliament, because they have excellent researchers, and I knew I didn’t have the time to look up 1000s and 1000s of bills in from 1950 which is what I arbitrarily uses my cut from 1950 to the time of the article 2015.
IAN LEE: I say, can you provide me a list of all the bills introduced in Parliament, legislating striking workers back to work? They did. It was magical. I mean, they had the dates the bill number, the date it was passed in the House, first, second, third reading, etc. 36 times from 1950 to 2015 striking workers legislated back to work by both liberal and conservative governments. The all times master it at legislating workers back to work was the pier Trudeau Liberal government, by the way, for the record, because his government was in power for 16 years.
But Rudyard, what was fascinating was I said, okay, what’s going on here? I went and looked at the who got legislated back to work 36 times the people being the unions being legislated back to work, were in that transportation sector, right Port of Montreal, Port of Vancouver, Pearson Airport, Air Canada, WestJet, CN, CP, you name it. If you went on strike, you got legislated back to work, but didn’t matter the government. So I updated this study last year at the time of the Port of Vancouver and the and the railroads, and the number is now 44 times, from 1950, to 2024, but the governments have been getting interest clever in the last five years. They’re not going to Parliament and legislating them back to work, because that’s very controversial, and people get mad and that sort of thing. They’re using the multiple tools in the Labour Code, such as they have the right to instruct the Labour Relations Board to send them back to work or extend the collective agreement, as they did with the postal work postal workers in December. Or they can appoint an arbitrator, which brings a strike to an end immediately. They can appoint a mediator. They have multiple tools, and they’ve done this mostly in the last five years. But it doesn’t matter. That’s a distinction without a difference. The government intervened and ended it and very quickly, just to finish this up. So I said, well, why is this happening? And I used the great Harold Innis who said, you know, at the University of Toronto, you can’t understand Canada without understanding the importance and centrality of transportation and communications. Because we’re such a vast, enormous country. We’re not Europe with the little postage stamp countries. You know, you can go from one end of bottom of Germany to the top of Germany in eight or nine hours. I’ve done it by car. So we are 8,800 kilometres long. We are completely dependent on railroads, on airports, on planes, and so these pressure from voters and people across the country saying, and this now is so great that governments step in and end it.
RUDYARD GRIFFITHS: Is part of the problem here, also, though, in that we’ve allowed a lack of competition within our airline industry for a whole variety of reasons, some good, some bad, some ugly. I’m not going to relitigate them all with our for our audience right now, we know what they are, but we have this situation in Canada where we really have, let’s call it two big carriers, WestJet and Air Canada. And this creates some unhealthy dynamics, both on the part of the unions, which have a disproportionate power if you have no alternative as a consumer, what are you going to do? But also, frankly, for the corporation that Air Canada enjoys all these protections, all of this, in a sense, explicit or indirect government subsidy. And and they now get to kind of force the unions back to work. And, and these, these people, these flight attendants, we know them. I love them. They they work hard, and they’re not able to to bargain with their labour in the same way, because Air Canada, you know, enjoys this duopoly with WestJet
IAN LEE: Rudyard, I think this is the overarching issue, notwithstanding that research I did, which is absolutely factual and historical of bills introduced in Parliament. That’s just the response of Parliament to the crisis of the moment, which is the shutdown of some part of the transportation system. The larger issue is what you’ve just identified. I testified before the House of Commons Finance Committee last fall, and it was about concentration and competition. I was sitting beside the head of the Competition Bureau of Canada, and we were sitting there sort of cheering each other. And I was saying that the I was talking about the collapse, or the decline, that dramatic decline of productivity in our country. And I have long believed, and there’s others who do, too many others who believe that the single most important predictor or contributor is the fact that we have about a third of our economy that is subject to protectionism, and it’s led to concentration, and you have these oligopolistic, concentrated industries with one or two or three firms, groceries, retailing, banking, transportation sectors, or railroads.
And so the end result is, not only does it drive up prices, because Adam Smith taught us this 250 years ago, Nobel Prize winners have shown this, that when you reduce competition, the protected companies in that industry go and put their prices up because they don’t have to hustle anymore. They don’t have to compete anymore. They’re protected, and it also drives down our productivity. And so the solution this is why, on the pre trade negotiations, I’m not changing the debate at all, but I’m just mystified why people are not bringing the government to account. I believe that they haven’t come to a trade agreement because we are saying, the Canadian negotiators, at the instructions of the government, are saying we’re not opening up supply management, we’re not opening up airlines, we’re not opening up banking, we’re not opening up airline, you know? And so we are risking not having a deal, because we want to protect these oligopolies that have been exploiting Canadians for years and years and years, the best thing we could ever do is to give up these so called protected industries, which, by the way, this is an Orwellian phrase these industries imply. And premier Ford does this. I’m here to protect you. I’m going to protect these companies. What you’re saying is you’re going to give them a licence to exploit the daylights out of us with higher prices, as they do in telecom and airlines and banking and these industries that are protected. So protected industries are only protected for the unions and the owners of those industries, and they exploit 40 million Canadians with higher prices. That’s the price we pay as Canadians, we should be begging Donald Trump to demand that we give up those so called protected industries.
RUDYARD GRIFFITHS: That’s why we like having you on this programme, Ian, because you say it like it is, and we don’t hear this enough, because I think a lot of people are going to either be blaming Air Canada today or blaming a union worker, which in some ways, I think is even more unfair, because I think people should have the right to withhold their labour to bargain, bargain for higher wages. You know, labour has power. Capital has power too. And the purpose of markets is to figure out the correct balance between them. But we, as you say, we don’t have free markets in so many of these different areas. But airlines, especially So, if your flights cancelled, if your summer vacation plans are interrupted, maybe Ian, we should be blaming again, the lack of competition, the lack of smart deregulation that would allow for more competition. If we wanted, just to wrap this up with you, if we wanted to apply that reasoning to the airline industry in Canada. What would we do? Would it be something like Europe, where you start allowing other countries to fly point to point inside Canada, to create, again, that competition that’s just not there and hasn’t been there for decades now.
IAN LEE: That’s exactly what we need to do. This idea that I’ve heard. I’ve had debates with professors and think tanks and unions. They say, Oh, my God, you know, maybe United Airlines will take a lot of market share against Air Canada. Think of the job losses. And I said they won’t lose their jobs. They’ll just move over to United Airlines, you know, so what? So they divvy up the market share differently right now, it’s a duopoly, literally, two companies. So now you have five companies, and they have smaller market share, and things will rebalance, and we’ll get higher more choices at lower prices. So we should be looking this is one time just…
RUDYARD GRIFFITHS: You know, the counter argument, though, is that they’ll say, well, the foreign competitor will come in and they’ll fly, Toronto/Ottawa, Toronto/Calgary, Toronto/Vancouver, and, you know, the not so dirty little secret about Air Canada is that it flies all these other routes that are unprofitable, because that’s the deal with the government in terms of having the protection is that they’re flying to, I don’t know, Gander, Newfoundland, or Timmins, Ontario, or all these roots that have make no economic sense. Now, to partly answer your question for for you, because there’s a bug bear for me, in the United States, if you live in a small town or small city, that’s part of the cost. Some of these towns and cities have to pay airlines to come in to service their communities. And that’s, you know, that’s your decision. You’re not living in Denver, you’re living in, I don’t know, Tombstone Arizona, or some other small place. So you pay, you internalise that cost, whereas what we’ve done, Ian, is we’ve socialised these costs. Is that right? That’s exactly
IAN LEE: Right. But I want to challenge you, Rudyard, just a little bit. I know we’re on the same page philosophically. I studied that when I was doing my PhD, the deregulation in 1978 under of all people, President Jimmy Carter and all the people came out of the woodwork. The small communities are going to be finished. They’re going to be destroyed. They’ll never have airline service again. The you know, Doom, gloom, end of the world. And the exact opposite occurred. What happened was under regulation. They were being regulated by the FAA to supply big honking planes into small, little towns that didn’t couldn’t support a 200 seat aeroplane. So what did the market do when it got deregulated? They calibrated the market so they sent what I call little putt putt planes, that’s planes that hold 20 or 30 or 50 people. And if you go in the States, and I’ve been in small towns in the States, you go to the big hub in Chicago or San Francisco or New York, and then you connect onto a little putt putt plane to go into, you know, a regional carrier, Idaho. And so the market grew. It did not shrink. It did not collapse. Gander will not lose its air service. Northern Saskatchewan will not. But they won’t be flying jets anymore, nice, big, fancy Airbus, 320, or 330s. They’ll be getting on a little putt putt plane that might hold 10 or 20 or 30 people, and they’re propeller planes. But there’s nothing wrong with that. That just means the market’s rationalising and allocating resources, small plane appropriate to the demand of that small community. There’s nothing wrong with that. Not everybody’s guaranteed to have. It’s like you can’t put the Ottawa Heart Institute in every little town across Canada. So, you know, the small towns where you have a heart attack, you go into the big city to go to the Heart Institute?
RUDYARD GRIFFITHS: No, well said. And of course, all of our airports are also not available for purchase or to have private operators bring us lower departure fees. It’s so Canada, isn’t it? Ian, we just tie ourselves up in this luniverse of little ropes holding us back in 1001 different ways.
IAN LEE: Exactly, exactly.
RUDYARD GRIFFITHS: Ian Lee at the Sprott School of Business. Thank you so much for coming on, Hub Hits. I really enjoyed this conversation with you.
IAN LEE: Thanks very much. My pleasure.
RUDYARD GRIFFITHS: And if you’re watching us on our YouTube channel, please subscribe. Hit that little subscribe button and click the notification bell at the same time, we’ll send you Ian’s next video with us as soon as it appears. And if you’re over on our podcast feed with a quarter of a million people that have downloaded a Hub podcast in the last 30 days, you’re in good company. Leave us a review. Tell us what you think of Hub Hits, or any of the other shows on the hubs podcast channel. I’m Rudyard Griffiths, thanks for listening to this edition of Hub Hits. Bye, bye.
