Companies & Industries

Let’s make flying less hellish

The solution is foreign competition.

On a snowy morning in early February, around 200 passengers in Toronto boarded Flight 794 to Costa Rica. They were scheduled to leave at 7 a.m.; the plane eventually left at midnight. In the intervening 17 hours, a compounding series of misfortunes—a broken de-icing machine, frozen engines and brakes, a lack of gates at the terminal, a plane that idled so long it had to refuel, a crew that worked so long it needed to be replaced—turned the flight into an almanac of the indignities of modern air travel. The passengers complained they were poorly fed, ill-informed, refused onboard entertainment and trapped in the cabin for one 13-hour stretch. Sunwing, the airline, offered $25 off airport food and a $150 credit—in case passengers wanted to risk a do-over—as compensation.

This isn’t an unusual story. Within a week of the debacle, two Air Canada flights to Mexico imprisoned passengers on their planes for more than eight hours. These are just extreme examples of an endemic problem. Only 58.6% of Air Canada flights were on time in January; the industry average is 78.3%, according to tracking service Flightstats.

There are now efforts afoot to improve airline customer service through regulation. The NDP this month proposed an Air Passengers’ Bill of Rights, which would require airlines to pay customers $100 for each hour trapped on the tarmac up to the cost of the ticket. The notion has populist appeal but is self-defeating. Faced with onerous fines, airlines will either increase ticket prices or reduce spending on other customer perks—it’s not like they can pay the fines using their gas money or employees’ wages. Furthermore, much of the discomfort experienced by airline passengers is caused by government rules. Sunwing couldn’t serve its grounded passengers hot meals because regulations prohibit operating a plane’s ovens until it’s airborne; ditto for the on-board entertainment system. (The concern is that passengers might miss safety announcements if they’re wearing headsets; the concept of a mute button has clearly eluded regulators.) If government agencies want to improve passengers’ lives, they should focus on reducing hassles, not adding to them.

Here’s a place to start cutting—the restrictions on foreign ownership in the Canadian airline sector. Hiking competition is the best way to improve the travelling experience, both in terms of customer service and arriving on schedule. Not only does an airline with a monopoly on a route experience greater delays, but it will also pad its schedule to make customers feel like they arrived promptly even if they could have arrived sooner, according to a Kellogg School of Management study. If nothing else, competition prevents airlines from dawdling.

Opening Canada to unfettered foreign competition is unrealistic. Only one country in the world, Chile, places no restriction on ownership of its air carriers. But Canada, which limits foreign investment to 25%, lags other jurisdictions. The European Union allows outsiders to control 49% of their airlines, as do Australia and New Zealand. A 2008 federal government panel suggested Canada adopt a similar standard, citing lower fares and better service as likely benefits.

The impediment to allowing foreign carriers into Canada is a fear that it would rob the country of jobs and revenue. But New Zealand and Australia found an elegant solution to appeasing such worries. For more than two decades, both have permitted foreign companies to establish a separate air carrier within their borders. The country’s second-largest carrier, Virgin Australia, was founded thanks to this policy change, with roughly two-thirds foreign ownership today. Competition between six domestic airlines means flights were on schedule 80% of the time in 2012. Fares dropped 21% in the first year of the new rules. Flight frequency increased. Carriers saw an uptick in travellers.

If Canada took this approach, it would mean foreign carriers paying taxes, providing jobs and creating competition. Canada’s air industry doesn’t need more rules; it needs more airlines.

James Cowan is deputy editor of Canadian Business