COVER

THE END OF WARD’S DREAM

COSTS AND COMPETITION CLOSE AN ERA

PATRICIA CHISHOLM January 30 1989
COVER

THE END OF WARD’S DREAM

COSTS AND COMPETITION CLOSE AN ERA

PATRICIA CHISHOLM January 30 1989

THE END OF WARD’S DREAM

COSTS AND COMPETITION CLOSE AN ERA

COVER

Pale January sunlight filtered into the executive office at Wardair’s headquarters near Toronto’s Pearson International Airport last week, highlighting the thick silver hair and still-youthful features of chairman Maxwell (Max) Ward, 67. Ward, whose manner is a graceful combination of boyish energy and polite formality, betrayed little emotion over the announcement the day before of the sale of the airline he built from scratch beginning in 1953. The buyer was one of Wardair’s toughest competitors, Calgarybased PWA Corp., which owns Canadian Airlines International Ltd. The sale, he calmly explained, was necessary because Wardair was not earning enough money to finance his ambitious expansion plan during a time of intense competition from both Canadian Airlines and Montreal-based Air Canada. Ward told Maclean ’s: “I’ve had knots in my stomach for a long time because I could see it building up. We gave it the almighty college try but we weren’t getting the figures.”

Although relatively small in comparison with Canada’s two other major airlines, Wardair has gained an international reputation for the high quality of its service. Discount fares that averaged 15 per cent less than the competition’s initially drew customers, but Canadians who travelled on Wardair also appreciated roomy seats, fine wines and well-prepared meals served on Royal Doulton china.

Intense: Wardair did not emerge as a serious competitor until the airline—traditionally confined to overseas charters—launched a regularly scheduled domestic service in 1986. Dramatic fare wars, which Wardair initiated, followed, and by last fall the competition had become so intense that PWA president Rhys Eyton stated that PWA would continue to undercut Wardair until the smaller firm called a truce. Ward’s success—much of it credited to his single-minded determination and relentlessly high standards—gained the former bush pilot wide admiration. And for many Canadians, he epitomized the self-made man. Said Frederick Larkin, analyst at Alfred Bunting & Co. Ltd. in Toronto: “There is a strong feeling of sadness about the sale. Ward is classy, meticulous and expert. He is a folk hero.”

Ward’s career does charm the imagination. Born and raised in Edmonton, he joined the Royal Canadian Air Force at 19 and, after the Second World War, became a bush pilot in the

Northwest Territories. In 1946, he established his first one-plane “airline” in Yellowknife with a fabricand wood-covered de Havilland Fox Moth, which he used to fly passengers and supplies throughout the North. He has lived through more than one close call with death— even surviving alone in the Arctic for five days after he ran out of fuel and had to make a forced landing. Then, in 1947, after he was caught loading passengers and gear aboard a small plane without a charter licence, he abandoned the charter business. But he returned in 1952, christening his company—consisting of one single-engine Twin Otter—Wardair Ltd.

The climb to Canada’s third-largest airline was rarely smooth. Ward recalled that when Wardair launched international passenger charters in 1962, “we did eight flights and we absolutely got slaughtered.” But a promotion that offered charter fares to former “war brides”—women who had married Canadian soldiers in Europe during the Second World War—paid off, and saved the company from bankruptcy. By the mid-1970s, Wardair had grown to become the country’s largest international charter carrier. The company suffered badly during the economic recession that hit in 1981. But five years later, after the Mulroney government deregulated the airline industry, Wardair had a chance to become a full-schedule

government regulators. He decried the interventionist stance that previous federal Liberal governments have sometimes taken in the transportation field, and he supports a greater role for business in the airline industry— including the privatization of airports. Said Ward: “Any business that is capable of buying, flying and maintaining a billion-dollar fleet of airliners is better equipped than the government to move people on and off of them.” Added Ward: “I would never say that government is efficient, and I have outlasted a lot of transport ministers.”

Even though Ward clearly regrets having his airline swallowed by a competitor, he maintains

carrier—something that Ward said he had been awaiting for 30 years. But, sadly, Ward said that deregulation came 10 years too late to save his airline. “I was robbed,” he said.

Bitter: At times, Ward has become embroiled in acrimonious fights with unions representing Wardair employees. The company fought hard to develop a two-tiered wage system, paying experienced employees on a separate, higher scale than newer employees. Wardair’s strict personal-grooming regulations have also been the subject of debate. A bitter controversy arose when Ward forbade a male flight attendant to wear an earring on duty because of Ward’s concern that passengers would worry about contracting AIDS. But Larkin said that the “corporate culture” at Wardair is generally considered to be a “very proud one. And rightly so.”

In addition to labor unions, Ward battled

that the Canadian airline industry must concentrate on developing huge airlines that are large enough to compete with major international carriers, including American Airlines Inc. and British Airways—even if that means smaller airlines will not survive. He said that making a profit on international routes is the key to future competitiveness. Said Ward: “Domestic airlines are only feeders for the offshore.” As a result, he said that his decision to sell out, which will divide the Canadian market between Canadian and Air Canada, is positive for the industry. “Canada absolutely has a problem in sustaining big enough airlines,” said Ward. And with a new 747 jumbo jet costing $125 million today, there is only room for the largest, he says. Added Ward: “Of course, I would have liked to have been the top airline.”

That pragmatism has been the hallmark of his career. He is unsentimental about his fron-

tier beginnings and said that the only reason he succeeded was because he joined the industry in its infancy. And, he added, it would be impossible to duplicate Wardair from scratch: “It is a different time. It’s not sad—it’s just the world.” Still, some analysts question why Wardair, which had built up a reputation for such excellent service—at a high cost to the airline—gambled on expansion in the first place. They argue that Wardair could have survived as a small but successful airline.

Losses: But Ward insists that he had no choice but to expand. “They said we were successful [as charter specialists], but we weren’t successful—there’s no money in it,” said Ward. Wardair only made money as a charter company, he said, by selling its used aircraft at a profit. The decision to expand, he added, was an effort to join the future, which belongs to the “mega-carriers.” He explained: “Balance sheets rule all in the world of business. I’m not in a tough spot immediately, but I could see the writing on the wall.” The numbers speak for themselves. In the nine months ended Sept. 30, 1988, Wardair lost $17.7 million on its operations, and analysts were predicting continued operating losses for 1989 and perhaps 1990. Meanwhile, Wardair’s competitors were well financed and could easily match Wardair’s deep discounts. Said Larkin: “In this business, it’s survival of the fittest. They just pound on the little guy until he can’t take it anymore.”

PWA’S Eyton and Ward both say that Wardair will continue to be a separate airline with Ward as chairman. But Ward has also acknowledged that, for the first time in decades, he will have a boss—the new owners now control his future at Wardair. Still, he earned more than enough from the sale to finance a luxurious retirement. The $248-million deal earned more than $70 million for Ward and his family. Ward and his wife, Marjorie, have two sons and two daughters. Son Kim is the head of marketing for Wardair and, until last week, was the heir apparent to the chairmanship of the company.

Pioneer: When he is not working for Wardair’s new owners, the aviation pioneer will continue to fly his own Twin Otter floatplane to his private fishing camp on Redrock Lake, 300 km north of Yellowknife. And if there is still a place in Canadian aviation for gamblers who are willing to take a chance on a new idea, Ward says that he knows where they should begin: “A good place to start would be to design a new bush plane.” (Production of the obsolete Twin Otter ceased late last year.) “I’d love to build a bush airplane,” said Ward. But, for now, Ward said that he will likely just spend more time at his camp. He frequently takes friends and foreign visitors to Redrock. Said Ward: “I have great enjoyment showing them the Canadian Arctic, the crystal country, the grizzly bears, the caribou—all those good things.” Staying in touch with where it all began is clearly important to the man who built—and who has now lost—the airline that claimed an important place in Canada’s aviation history.

PATRICIA CHISHOLM