BUSINESS/ECONOMY

An assault on high airfares

ANN WALMSLEY May 21 1984
BUSINESS/ECONOMY

An assault on high airfares

ANN WALMSLEY May 21 1984

An assault on high airfares

When Transport Minister Lloyd Axworthy told senior ministry officials last fall that he wanted to deregulate the Canadian airline industry, they warned him that the established system was too firmly entrenched. The officials were wrong. Last week Axworthy ordered the airlines’ regulator, the Canadian Transport Commission (CTC), to stand ready to approve lower air fares and wider competition routes. The new policy, the effects of which consumers will not feel until this summer, eliminates the old national, regional and local classifications of airlines. In the past that has meant that the carriers were strictly limited on the routes they could fly. Now any airline may seek CTC approval to fly almost anywhere in Canada. And within two years airlines will be able to discount fares as much as they wish.

Axworthy’s changes will be less sweeping than those which rocked the U.S. industry after it was totally deregulated in 1978. For one thing, the CTC will continue to regulate northern routes to protect existing service to isolated communities. As well, any new airline will still have to apply to the CTC for permission to operate.

Reaction among carriers ranged from restrained approval to outright jubilation. An exultant Maxwell Ward, president of Edmonton-based Wardair International Ltd., Canada’s largest charter operator, immediately pledged to cut existing scheduled fares by onethird on any domestic routes Wardair begins to fly. That would mean that a one-way economy fare from Toronto to Vancouver could drop from the current $390 range to roughly $260.

Predictably, representatives of the travelling public were pleased. Said Consumers’ Association of Canada spokesman Kenneth MacDonald: “We’ve been arguing for more competition since 1977.” But there were skeptics too. York University economist Fred Lazar warned in a recent book that deregulation would reduce, not expand, consumers’ choices of routes and fares. Lazar predicted the airlines, once deregulated, would simply compete for the most lucrative routes and match each other’s prices. At week’s end the CTC revealed its own, more cautious, proposals for deregulation, which included continued restrictions on fare cuts. But the minister can override the CTC if he wishes. He has already made clear that he holds sway over both the CTC and the industry. ANN WALMSLEY