-acquisition of both Air Canada and Canadian Airlines by Onex which, as argued above,
would not be in the national interest of Canada;
-a significant investment into Air Canada by the One World Alliance members (and/or by other foreign parties) in order to stave off an Onex takeover, but this would nonetheless reduce
Air Canada's inclination, freedom and ability to conduct itself in the national interest of Canada;
and
-failing either of the above the imminent collapse of Canadian Airlines.
2. Approve the Takeover
The proposed takeover of Air Canada and Canadian Airlines by Onex is not a good thing for Canada. It should be blocked. Canadians should beware the telltale words about 'maximizing shareholder value' and about 'rationalization'. Onex is the world's largest caterer of airline food; when was the last
time you really enjoyed an airline meal and what does that say about it being a company which truly cares about its customers versus maximizing its own profits?
Let's look briefly at the history of 'maximizing shareholder value', specifically the interaction of the finance/market sector and the transportation sector. During the 1950's railroads faced increasing
competition for passengers from jet aircraft and - in the U.S. - from the Interstate Highway System.
They should have been more innovative, turning trains into rolling universities or land-going cruise ships or even rolling shopping centers, however their finance gurus said: "Revenues are falling so cut costs or else our earnings will decline and our stock will fall!" When costs were cut revenues fell some more, so they cut even more costs. Most of the big railroads of those days are now dead, having cut their way to extinction thanks to the rule of big finance.
Now lets move on to the 'Great Lorenzo', an American finance and acquisitions guru; he used his puny little Texas Air International to take over much larger Eastern Airlines and Continental Airlines, shifted
many of their planes to the non-unionized Texas Air (to avoid paying pilots union rates) and then proceeded to financially rape and pillage all three companies into bankruptcy. The U.S. Congress later passed legislation designed, in part, to ensure he never owned another airline.
A further example may illuminate. For decades, the Douglas Aircraft Company was the dominant builder of air transport aircraft in the Western World. When they ran into a cash crunch in the 1960's they were
taken over by the overly pecuniary McDonnell Aircraft company, who built fighters and were thus accustomed to having the government assume all the development risk and cost for them. Every time you launch a brand new commercial airplane you bet the company, so they never launched one and
I had a ring-side seat to watch them wreck Douglas, which had 42% of the world market when I worked there as a summer student in 1978 and only 4% in 1997 when Boeing bought McDonnell Douglas. Indeed, Harry Stonecipher and John McDonnell did a fantastic job of maximizing shareholder value while wrecking the company. (It is possible to do both at the same time.) Incidentally, GEC has been doing the same thing to Canadian Marconi Company for the past decade.
Our firm has done a lot of contract work for McDonnell Douglas and Boeing and having lived through the takeover of the former by the latter, I can tell you that when 'maximizing shareholder value' becomes
more important than caring about a business' customers that very bad things can potentially result. Onex says that 'maximizing shareholder value' is its only real goal. This reminds me very much of the 'Great Lorenzo' in the U.S. who used his tiny Texas Air to take over both Eastern Air Lines and Continental Airlines, ultimately driving all three firms into bankruptcy while he raped and pillaged them financially and mistreated their employees. If this takeover goes ahead Canadian MP's will have very many unhappy constituents who work for, sell to or ride on the resulting merged airline.
3. Complete Re-regulation
During my university years I personally intervened in favour of Max Ward's charter airline (Wardair) which at that time was applying for permission to fill the empty cargo holds of the passenger aircraft it was flying across Canada every day. Both Air Canada and CP Air objected to this and Air Canada was continuing to argue that it was an 'infant industry' requiring government protection. Air Canada's protestations that it was a '35-year-old infant' were at that time about as popular with most Canadians as one of its economy-class parfait desserts. Not only was its food and drink service abysmal, under a highly regulated environment Air Canada had over many decades grown fat, happy, and highly insensitive to customer needs or desires. Indeed, there was a popular - and widely sung - derivative of our national anthem about the airline:
Air Canada - Across our native land
Through rain and sleet
We dash at your command
My bags have gone to Mexico
Or possibly Dundee
While I remain, Air Canada
To stand in line for thee
All tickets sold, all coffee's cold
All flights are late and we have not been told
All flights are late and we have not been told
The Canadian form of airline regulation was a particularly heavy-handed and bothersome one; as a mailing list recipient of applications tendered to the Canadian Transport Commission (CTC) - Air Transport Committee for new or amended air carrier operating permits I read a torrent of applications from bush-league airlines which had one DHC-2 Beaver and two Cessna 172's and were now applying to operate a third Cessna! Clearly, putting this kind of air service under federal regulation from bureaucrats in Ottawa was excessive, expensive and unnecessary. It also took months to get the third Cessna approved and often by then customer demand had evaporated or gone elsewhere.
Worse still, the CTC frowned on new would-be charter operators and rigidly enforced the affinity charter rules which insisted that everyone on a charter must be a member of a club or society. My mother, in 1969, joined the Irish Society (even though we were not the tiniest bit Irish) to obtain a lower airfare on a BOAC charter flight to Great Britain for the two of us. Eventually, the affinity charter rules descended into the realm of pure farce when an enterprising Canadian businessman created "The Order of Old Bastards" an organization whose only raison-d'etre was to book low-cost charter flights for its members. The only requirement for membership was to pay a fee to join and to thereafter hail all other members with the greeting "Hi there you old bastard." No, this is not fiction; it actually happened.
The saddest thing of all is that even with the above-cited strict form of regulation the CTC failed to prevent the mergers and acquisitions which wiped out Canada's once-healthy five regional air carriers which were Pacific Western Airlines, Transair, Nordair, Quebecair and Eastern Provincial. During the summer of 1977 I worked as a researcher on the Regional Air Carrier Study at the CTC and can tell you that if these five very vibrant airlines were still around today, we would now have a much stronger airline industry in Canada.
Like most people of my generation (who, among other things, wanted to go to Europe during the summer) I did at that time - and still do - favour airline deregulation and there is little doubt that despite the violence of the shakeout in the United States that the net impact there has been positive. Many other countries have at least partially deregulated their domestic air transport systems although protectionism remains a major factor in international civil aviation.
Air Canada, as a privately owned company, has been forced to stop behaving like a hegemonious government protectorate and has had to make its own way in the world. By and large, it has succeeded and the quality of its current operations and management are significantly improved over what they were prior to 1990. The path from there to here has been littered with cultural change, business process
re-engineering and high management turnover, however. Unfortunately, Canadian Airlines has not fared as well, but one of the reasons for this was not predictable when I was a youth - the fact that Canadian Pacific would later sell CP Airlines into the hands of a much smaller corporation, one far less able to respond with the scale of investment required to take advantage of all the domestic and international opportunities which deregulation opened up. (Conversely, Wardair may have over-invested but that is not the fault of deregulation, rather it is the fault of its own management.)
Let us not forget the good arguments marshalled in favour of deregulation in the first place, that new and innovative operators would enter the market, prices would fall and service quality would increase.
Finally, the treaties we have signed with the United States and other countries would make it more difficult to return to a situation of total regulation even if that was our desire.
Deregulation does have some good points. Let's not throw out the baby with the bath water.
4. A New Airline Policy - Partial Re-regulation
It is the author's view that partial re-regulation, as detailed below, is the only remaining viable approach for Canada.
A New Airline Policy
1. A National Aviation Policy
A new national airline policy should contain several key points, as set out below.
(A) Two Strong National Carriers - Moderated Competition
The issue of Canada continuing to have two national air carriers is more important than letting Onex - or even any existing airline management - treat maximization of shareholder value as the only true objective. What if Canada ends up with no national airlines? Will the benefits the Onex shareholders have received over the next few years while their management rapes Air Canada make up for what we all will suffer down the road?
While this may be a very difficult proposition for the MBA or accountant to understand, the national interest is simply more important than the bottom line. For example, no accountant has ever been called upon by any national government or sovereign people to help cost-justify the raising of an army to beat back a force of invaders. During wars, governments print , borrow and spend money with complete abandon and worry about finance afterwards Some things just cannot be bought so they should not be abdicated nor given away.
The U.S. airlines have sometimes fallen into this same trap of thinking that the only thing that matters is what the financial community (the banks, stock market and large institutional investors such as mutual funds) thinks of them. Surprising as it may seem, there are also good business reasons for ensuring that airlines moderate their cost-cutting and shareholder-pandering. Such diverse airlines as TWA, United Airlines and British Airways have been learning the hard way that not every change which pleases the accountants will please the customer. In the U.S., passengers have never been more angry with airlines than they have during 1998 and 1999 and these cries are quickly reaching the corridors of power in Washington D. C. Passengers are tired of overcrowded and dirty aircraft, too little space between the seats, non-enforcement of carry-on baggage limits, insufficient (or non-existent) food service, ATC delays and many other problems. Not all of these are the fault of airline managements, but some of them are.
The reality, of course, is that large companies such as Air Canada can re-invest more funds in their own operations if they so choose, and this will permit them to care less about what Bay Street and Wall Street think of them. Indeed, EVERY corporation in the world has five constituencies:
(1) The country which provides a stable environment for it to form and grow in the first place - without this there could be no company.
(2) The customers who consume the products, services or information it produces.
(3) The employees who are the company.
(4) The suppliers without whom the company could not operate.
(5) The shareholders and bondholders who put up the required money.
All five are equally important - the problem which much of American (and Canadian) business and industry has had over the last few decades is that a surplus of MBA's and accountants has convinced business leadership that only #5 above really matters. That is simply untrue. All five matter equally.
The simplest way to implement this policy of two (solvent) airlines is to:
-disallow any further mergers and acquisitions;
-divide all routes in Canada into three categories:
-those with enough traffic to sustain wide-open competition (the triangle, the corridor,
the transcontinental backbone route and some international routes);
-those where only limited competition will be permitted, which will be partially regulated
(all other international routes and most of the larger regional routes plus some inter-
regional routes); and
-those where no competition is viable, which will be fully regulated and where in some
cases subsidies may be paid (all remaining routes, particularly those to smaller and
remote communities plus most routes in the North); and
-insist that each of the two national airlines flies a portion of each of the three categories.
(B) Limit Foreign Ownership
Foreign ownership in Canadian carriers should not be permitted to rise above 25% and should, over time, be reduced to ten percent.
>>> It never ceases to amaze me that the same Americans who are so vocal in promoting open skies and free trade, and who want access to as many markets around the world as they can get for their own airlines - and who like to buy local airlines (and even railroads) in foreign countries - have very stringent foreign ownership rules restricting who can buy into their own airlines. Further, they often seek to impose their own anti-trust legislation on airlines operating mostly outside their country. For this reason, no American criticism of Canadian foreign ownership rules has any credibility.
>>> By the way, this sort of thing is not new. The U.S. publication Aviation Week & Space Technology
in 1958 was quick to criticize the Avro CF-105 Arrow interceptor as having skin-heating problems when it exceeded 1404 mph while still climbing and still accelerating - and 2000 mph in level flight - when at that time there was no interceptor in their own inventory or even under domestic development which could fly anywhere near that fast.
(C) Promote Canadian Access to Foreign Skies
As cited above, the Canadian government and air carriers have failed to work together to turn the broadening open skies initiatives around the world to their advantage. The way to do this is to re-institute the concept of having a national aviation policy, something not seen in Canada for a very long time.
Given our relatively small population, the only way Canada can build a strong airline industry is to do something different than what the U.S. carriers are doing. We need to increase our traffic not by doubling our home population, but by being more innovative, by trading on our proximity to the United States and by taking advantage of the rapidly increasing traffic across the Pacific.
>>> For example, we need to offer tour packages where Americans drive across the border to the Chateau Montebello, stay two nights (with one free), play golf for a day and then fly to Europe from Mirabel on the third morning.
>>> After all many Maritimers used to go to Bangor, Maine to get cheap flights to Europe. Why can't Americans come to Quebec for the same thing?
(D) Preclude Cabotage
Cabotage refers to the airline of Country A operating domestic service inside Country B. The possibility of Onex wrecking Air Canada (the way Lorenzo wrecked Texas Air, Eastern and the original Continental Airlines) must have C.D. Howe spinning in his grave. He created Air Canada's predecessor Trans Canada Airlines (TCA) expressly to prevent U.S. carriers from moving into Canada and opening up our east-west routes which would preclude the development of a strong national airline.
>>> Are we prepared to simply give away now what C.D. Howe and so many others fought so hard to maintain then and during all the years since?
(E) Boost The Canadian Aircraft Industry
Although they have received some government assistance, it would probably be fair to say that Bombardier (in its successful acquisitions of DeHavilland Canada, Canadair, Shorts and Lear - and in 1997 almost acquiring Douglas Aircraft Company) has succeeded in spite of, not because of , government policy. All of Bombardier's major competitors in the regional and corporate aircraft markets (in countries such as the United States, Great Britain, France, Germany, Brazil and even Italy) are supported by national aviation policies which recognize the interrelationship and importance of a strong domestic airline industry (and the home market it provides) to an internationally successful domestic aircraft industry.
>>> With Bombardier now preparing 90-seat and 110-seat airliners this is the first time since the late 1950's and early 1960's (i.e. the first time since the demise of the Avro CF-105 Arrow) that Canada has been building mainline aircraft. Mainline aircraft are generally considered to be those which have 100 seats or more.
>>> While I was delighted to see Air Canada buy the Canadian Regional Jet (RJ), that should have only been the beginning. What if Pacific Western Airlines, Transair, Nordair, Quebecair and Eastern Provincial were still around? Wouldn't they be buying Dash-8's and RJ's - and the new 110-seater airliners - from Bombardier too? Undoubtedly! Clearly, despite the legions of researchers and economic modellers they had at their disposal, the Air Transport Committee of the CTC made some very serious mistakes in letting our regional air carriers wither and die on the vine.
2. Develop Supplementary Air Services
(A) Rebuild the Regional Carriers
See above.
(B) Cooperative and Educational Airlines (CEAL)
See ANNEX A.
(C) Modified Conventional Takeoff and Landing Aircraft (MCTOL)
See ANNEX B .
ANNEX A
COOPERATIVE AND EDUCATIONAL AIRLINE (CEAL) CONCEPT
There is, in the author's view, the distinct possibility that the creation of a co-operatively owned (and operated) charter airline could serve the co-operative and educational affinity charter market in both the United States and Canada. It would be called a Cooperative / Educational Airline (CEAL).
Such an airline would be operated on a not-for-profit (break-even) basis, would retain permanent professional managerial, operational and maintenance staff and would block-sell transportation in advance to member organizations including:
-producer, lateral and consumer co-operatives;
-provincial and state universities;
-state and city colleges;
-private schools and colleges; and
-school districts / boards of education.
The co-operative sector (co-op stores, farm producer co-ops and so on) is one of the largest and least well documented economic phenomena in North America. In both the United States and Canada there are billions of dollars of assets controlled by co-operatives. In past, they have invested in (and have also acquired outright) various other enterprises. In Canada, co-operatives comprise close to 30% of all financial institutions and have been estimated to comprise as high as 60% of all registered and/or incorporated non-farm agriculture-related businesses. U.S. statistics are harder to isolate, but are believed comparable in the non-farm agricultural sector. While some of these co-ops have a very 'thin' type of affinity (people simply buy a membership card to get lower prices at a hardware store or become single-share owners of a co-operative insurance company to get lower insurance rates) many others have more depth. In particular, producer co-ops which exist in most small towns and rural areas foster active member participation in many activities above/beyond the principal purpose of the co-operative itself. The principal attraction for co-operative members would be the availability of discount, advanced-booked charter transportation to holiday and family destinations within North America and the nearby Caribbean. Many of these people now travel on discount airlines or by surface transportation (likely mostly private automobile and bus), but a CEAL would offer travel rates considerably below those offered even by discount airlines and might also directly serve smaller canters not regularly provided with pure-jet service, even at the scheduled (unit-toll) tier.
Educational institutions, particularly at the post secondary level, still possess large trust and endowment funds which could be funnelled into equity participation of a CEAL. The principal attraction for educational institutions would be the ability to offer both a very wide range of educational field travel (directly in support of course curriculum) as well as to offer break-period recreational or return-home travel for students studying at locations away from their homes. It should be noted that the class of service necessary for this market does not - in large part - exist at all at this time. Further, to the author's knowledge the extent, nature and characteristics of this market have never been formally studied except as below described.
What do producer/lateral/consumer co-operatives have in common with educational institutions insofar as forming a not-for-profit airlines is concerned and why should these two groups collaborate in this way? There are, in fact, several reasons:
-both represent 'non-mainstream' audiences not well served by the existing scheduled,
discount and charter carriers because they:
-in many cases do not originate from in or near major hub areas and are
thus difficult to 'collect' into groups large enough to support wide-body
economics without routing over connecting conventional carriers, thereby
significantly raising trip time and - more importantly - total trip cost;
-have less disposable income than the median, mean and mode of the U.S.
working population - co-op members generally save and/or earn money
by participating in their chosen co-ops - we know that farm incomes are
not remaining apace incomes at large - students traditionally have more
limited funds due to part-time nature of their work and the fact that in this
period of their lives it is usual for income to exceed expenditure; and
-even if each group organizes, and they then collaborate to seek to collectively
negotiate bulk purchases from major scheduled and/or charter carriers, they are
not in a position to gain the same price per seat-mile as they could from an
airline which they own/control since the commercial carrier must have at least
some positive yield from each Revenue Passenger Mile (RPM) sold - and from
each sector sold - unless such sales are merely used to reduce the net costs
of already-required staging or deadhead flights already carried on their master
schedules - this means that co-op/educational users are in a third-class
negotiating position from the outset - they will at best be offered undesirable
departure and/or arrival times or will be forced to resort to use of carriers with
highly marginal safety records and equipment (such as the Miami-based airlines
using mid-1950's propeller aircraft (L-1049, DC-6/7 and so on).
The concept of a CEAL is based on the proposition that there is a major 'sub-market' which is not well served by the current full-fare and discount-oriented scheduled and charter air carriers in North America. This is to suggest that there are many prospective trips which would be made if the cost was lower and if specifically tailored and more convenient origin-destination arrangements were available. It is also to suggest that such trips are not being made under the current circumstances for cost and/or convenience reasons.
Previous research indicated that census data in both the United States and Canada show a significant portion (if not a majority) of the students who attend secondary institutions - with the exception of inner city areas and some regions of the U.S. southeast and the Canadian maritime provinces - have the capacity (on their own or with parental assistance) to afford one to two academic field trips or personal trips in the $150-200 price range. Indeed, sports team, band and academic trips using buses frequently fall into this price category just for surface transportation, not including food, accommodation or attractions. University students generally have the same, or more, available/disposable income than high school students, although city and community college students were found to have the same or less in the majority of cases. It should be noted that the research done on this subject is now a number of years out of date and would need to be updated. In the U.S. there is also the fact that affirmative action programs may have lowered the median/mean/mode levels of available/disposable income of university and college students.
Co-operatives of all types, but particularly producer co-ops, seek to acquire services and products which will be of assistance to their members. During the previous research, it became clear that a very significant proportion of the membership of producer co-ops do NOT live proximate to major air transport hub cities. This is particularly true of agricultural producer co-ops such as exist throughout most of the United States and in the Canadian prairie provinces as well as in Ontario and Quebec. They are therefore faced with all of the following if they wish to make a medium to long distance recreational or family purposes trip:
-closest service will be with regional or commuter airline turboprop equipment, providing a link to a major hub or at least a larger city;
-requirement to change aircraft, and often to interline, at the first stop;
-in many cases a three-sector trip from origin to destination; and
-less ability to take advantage of various forms of charter due to the need to obtain
commuter or regional airline connections from/to their point of origin and often
the inability to interline the fare, resulting in two separate fares and two tickets.
It need hardly be added that infrequent flyers seldom prefer commuter type equipment to mainline (minimum 100-seat) airliners. Nor do they enjoy one or more changes of plane, particularly when made through large, confusing and infrequently visited airports.
It is therefore believed that members of rural and small-town producer co-operatives, and full-time students attending educational institutions at the secondary and post-secondary levels (in centers of all sizes), represent a largely untapped air transportation market. The characteristics of this market are different from those of conventionally defined business, visit friends and relatives (VFR) and vacation travellers. The optimum means of serving co-operative and educational travellers is with a purpose-dedicated, not-for-profit (break-even) corporation. This is true because:
-scheduled airlines must program their schedules and pricing for business traffic, with
secondary consideration of VFR travellers and tertiary consideration of true vacation
travellers (CEAL travellers will consider their own needs the top priority);
-yield management systems are intended to balance load factor, cost of production and
marginal cost pricing in such a way as to maximize overall obtainable yield within whatever
operational constraints are placed upon the system by the operator (CEAL travellers are
seeking low (and consistent) pricing, not marginal cost pricing);
-in general, larger aircraft offer a lower cost per Available Seat Mile (ASM) and are thus
favoured when stage-length and traffic will support them (CEAL groups will seldom
be large enough to justify large narrow body - or wide body - aircraft);
-while airlines may be reducing travel agent commissions, they are still a portion of the
fare as presented to the passenger (CEAL will not require travel agent services for
the air trip component of travel since many trips will end with students camping at
a field site or else transported by a local educational authority's own or contract vehicles
school vehicles);
-while the volume of demand for the services of CEAL-type operators may well justify
creation of several such carriers in North America (perhaps collectively operating a
substantial number of aircraft) it would not necessarily represent a high percentage of
total North American (U.S. domestic, trans-border and Canadian domestic) RPM's and
may thus be of marginal interest to the major carriers (CEAL is not a large enough
market to create mega-airlines nor to encourage their entry); and
-except in special or discount circumstances, even a major carrier with very low costs of
production cannot match the cost (and price) profile of a carrier which has its capital
provided largely (or solely) by member institutions and which is not required to turn a
profit.
This is not much different from the suggestion that school buses are not generally operated in inter-city bus service nor in transit service. This is so because, while they have lower capital and operating costs, they do not provide the comfort and performance attributes required in those types of service. True too, school bus operators are either school districts or private firms or individuals who have the capital for their vehicles provided (directly or indirectly) by the public educational authority.
If it is assumed that co-op and educational travellers are willing to sacrifice on-board service and pre-/post-flight amenities in exchange for access (as a member/owner of the CEAL) to custom-tailored discount air transportation, then a business model for a CEAL can be readily constructed.
The CEAL will be founded, owned and operated on behalf of a group of owner organizations each of which is an educational institution or co-operative and each registered member of which is offered - as owner participant - advance booked access to discount air transportation for academic, VFR or recreational purposes. The preponderance of academic usage would be for academic field trips, except in the summer, while most co-op use would be VFR/vacation.
The CEAL would draw heavily on the business administration (and large-scale computing) resources of the constituent member organizations so as to keep the overall central administrative cost and burden to a minimum.
The CEAL would be capitalized by large-scale equity investments from the co-op and institutional owners based on a business plan which was, in turn, based on the usage projections developed by these constituent organizations - based on their surveys of their own respective memberships, utilizing CEAL-developed survey instruments.
Paid-in capital would be employed for all of the following purposes:
-acquisition of newbuild or used aircraft;
-acquisition or lease of maintenance facilities;
-working capital to front-fund the hiring, equipping and supporting of professional
airline executive management, line management, airside/groundside handlers,
maintainers, flight crews, cabin crews and other required personnel;
-pursuit of all required regulatory and technical certifications;
-acquisition of hull, liability and other operational insurance required for domestic and
international operations;
-other initiation costs required to place the equipment in full-scale operation.
The CEAL would establish a working master-schedule and then allocate blocks of flights to each of its member organizations, each of which would (as the case may be) allocate or market/sell the flights to its sub-organizations (such as faculties within a university) or to its individual members (as in a co-op or as in a university selling summer trips to individual students.) Nonetheless, a highly dynamic scheduling algorithm would be required because member institutions would be permitted, within certain lead-time constraints, to buy, sell or trade flights among themselves as required, based on true indicated demand.
CEAL firms would require two types of aircraft:
(A) Initially, a highly flexible 100-seat aircraft for North American service with a low break-even point, very short (and gravel) field capability, but also with a very considerable range capability achieved by making all or virtually all baggage carry-on and using more below-deck space for additional fuel tankage;
(B) Later, a large widebody aircraft with extensive range for trans-oceanic service with an emphasis on direct (non-stop) service between North American and European destinations and one-stop (technical stop only) service between North America and Pacific Rim destinations.
Even for a CEAL serving a single region (such as California, Arizona, Nevada and New Mexico for instance) the aircraft would be highly itinerant and might operate away from the CEAL's home bases for several days at a time. While the operator could partially offset this factor by maintaining satellite service bases within its prime coverage territory - and perhaps in the most frequently visited off-territory locations - there would be no way to fully offset the impacts of this itinerancy. A high degree of technical and operational self-sufficiency (and very good dispatchability) would therefore be required of each aircraft. This factor alone, combined with the likely availability of sufficient capital, probably would justify the acquisition of newbuild (versus brokered) aircraft. The incremental cost and cascading schedule disruption of (even occasionally) taking assistance to a disabled or non-dispatchable (sub-MEL) aircraft would rapidly offset the savings of not having purchased highly reliable (new) aircraft in the first phase. This needs to be clearly understood.
The constituent co-ops and institutions of the CEAL would be responsible for collecting and forwarding - in advance - the funds for any trip whether paid by the member organization, one of its sub-units (like a faculty or department) or by the member's registered individuals who would be co-op members or card-carrying students. The CEAL would have final scheduling authority and would be empowered to do something which no scheduled operator or charter operator could ever do; to re-negotiate the dates of specific trips to maximize aircraft utilization, rationalize itineraries and minimize deadheading. Where a participating organization's representative and the CEAL could not come to terms on trip re-scheduling, the CEAL would refund the monies and cancel the trip.
Therefore, the CEAL would always fly on a pre-booked and pre-paid basis, suffering only any unavoidable positioning and re-staging flights as overhead. Given its overall picture, the CEAL would also have the discretion to determine what was an acceptable load for a given flight, as well as to combine booked flights with similar dates and O/D characteristics. Again, this is something scheduled and charter airlines have little ability to do. The secret, of course, lies in the fact of far-advance booking. If Institution X knows that it will have 300 first-year geology students and makes a field trip a compulsory part of the course, it may elect to book 250 spaces to allow for drop-outs plus to allow for the cases of any students who are absolutely unable to afford the trip. This booking might be made in September for a January trip, with progressively more details completed as students sign-up with a down-payment, confirm their intent to participate and then pay the remainder owing all in advance of travel. Another participating college or even a school district would be tapped by the CEAL to provide connecting ground transportation at the destination end and this would have been built into the cost at the time the CEAL offered the institution a binding cost/service package quote. Note that this quote would not bind the CEAL to a specific date but only to a departure date window with a fixed visit length at the destination. By November or early December the CEAL would have a clearer idea of schedule. If - at the cut-off date - only 220 students had signed up the CEAL might elect to fly two 80-passenger flights (using a 100-seat aircraft) and to combine the final 60 with another trip from another school. A final commitment would then be made by the CEAL and accepted by the institution,, at which time their mutual commitment would become firm and irrevocable. Cancellation by the institution after that time would carry a very heavy cost penalty. As cited above, this approach would require a radically different approach to scheduling than is now in use by the scheduled and charter carriers. Of course, many trips would involve much smaller parties of co-op members or students.
ANNEX B
MODIFIED CONVENTIONAL TAKEOFF AND LANDING (MCTOL) CONCEPT
MCTOL and Augmentor Wing
It is of course very difficult to write with anything remotely approaching impartiality about event with which one was directly involved. The reader will have to bear with the fact that I personally participated in some of the issues discussed here and hopefully will have some frame of reference to form an independent judgement. During 1979-80 my small consulting firm (founded earlier with two partners) conducted a study for the Science Council of Canada (SCC) which addressed various potential industrial opportunities for our aviation industry, outside those then being exploited. The best of these potentials was believed to be the development of a 100 seat Modified Conventional Takeoff and Landing (MCTOL) mainline air transport aircraft which would cruise at 500 mph and take off from 2500-3000 ft runways, employing augmentor wing technology (wherein some jet engine airflow is used to augment wing lift) and likely with an externally blown flap (one aerodynamically interactive with the engine). This latter technology was being studied and developed by DeHavilland in Toronto at the time. It would serve high density corridors and be able to land at small close-to-downtown airports. The aircraft was seen as a possible derivative of an existing transport, such as the Boeing 737-200, McDonnell Douglas DC-9-30 or BAC-111. The federal Department of Industry, Trade and Commerce (ITC) had been involved in funding, and closely following, some of the exploratory work on the augmentor wing concept. This, plus certain other STOL research at the National Research Council (NRC) and elsewhere, involved both DeHavilland and Canadair in one way or another.
After much discussion between SCC and ITC, it was agreed to consider launching a project for formal definition of such an aircraft, provided there was industrial interest. However, ITC's Transportation Industries section made little secret of its indignation at SCC's funding of the original study and its follow- up involvement in trying to foster this project. This was highly irregular! It was ITC's job to foster good ideas and encourage the transport equipment industry, a Director General huffed, SCC was supposed to be in the white-coated lab science business! When the bureaucratese is translated into English this renders: "No good because not invented here! Go away!" Undaunted, SCC stuck to its guns and soon escalated the matter to higher levels, meanwhile commissioning a bit more work from us on how to approach the project.
We elicited help from some of the most qualified people on the continent, who validated our approach. Boeing evidenced some interest, providing that the resulting license-built (and highly modified) Canadian version of the 737-200 airliner would be sold only into the very specific MCTOL role.
However, when Canadair was presented with the suggestions that it consider license-building the Boeing 737-200 (but with many MCTOL enhancements) they called the idea 'folly'. They said they would be 'marrying an old lady' if they took on the 737 airframe (this is a direct quote from a Vice President) and the project thus wouldn't get very far. Even the subsequent intervention of more senior officials in Ottawa failed to budge either the ITC bureaucrats or the stubborn Canadair. Neither did DeHavilland's apparent willingness to co-operate. Government, not wanting to anger or rouse Canadair, proved too timid to meddle any further. (Clearly, much of government meddling in private business is destructive but this is not always the case; sometimes - as C.D. Howe well knew - lighting a fire under someone's posterior is distinctly in the national interest!).
At the same time, the U.S. Navy was seeking a Carrier On-board Delivery (COD) aircraft to carry significant cargo loads onto the restricted length and difficult environment of aircraft carrier flight decks. This represented a further potential for the augmentor wing - and one which could have shared many development dollars, engineers and other resources with a prospective MCTOL civil aircraft, although obviously something smaller than 100-seat capacity was needed here. This too, alas, fell by the wayside. Along with an SCC rep, I presented a paper on the MCTOL concept at a Federal Aviation Administration conference in Washington D.C., rather ironically sharing the platform with my old boss from McDonnell Douglas. While the paper was reasonably well received, no further Canadian action ensued. Perhaps it was in part my fault for being an over-eager 24-year-old consultant who had ceaselessly prodded SCC in this direction. Perhaps the heavenly 'orbs' simply were not in the correct alignment. Or maybe, just maybe, it was yet another instance of that now familiar and famous scenario wherein Canada 'drops the ball'. More painful still were Canadair's comments about 'marrying an old lady', since they themselves had previously adopted a dated airframe in the DC-4 and updated it with new engines and with pressurization. Both the Canadair DC-4M2 North Star and C-4 Argonaut were based on the then 'obsolete' DC-4, but sold well in Canada and elsewhere. It need hardly be added that the same 'old lady' 737 has since been derived into the -300, -400, -500, -600, -700, -800 and -900 series versions plus a business jet and has gone on to become the largest selling jet airliner ever.
It is tempting to blame Canadair and yes they were short sighted, but government is supposed to have been there to see and point out the bigger picture. Why even have an ITC 'Transportation Industries' section (or its present-day equivalent) if it shirks from a healthy argument with industry because of petty internal bureaucratic politics, because it didn't invent the idea or because of concern about being 'too courageous', as they put it on the British comedy 'Yes Minister'. With a clear opportunity existing (which the BAe 146 four-engine regional jetliner has later helped to fill) for a plane twice as big and twice as fast as the 50 seat DeHavilland DHC-7 STOL airliner, our government receives a rating of about 2 out of 10 for its poor leadership and lack of vision in this instance. It is only now, some 20 years later, that Canada has a seriously competitive aircraft program capable of approaching 100 seats (in the Canadair RJ) although not with STOL capabilities at such.
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