Air Canada

The History

Peter Pigott

• Publisher: Dundurn Press
• Year: 2014
• ISBN:
  9781459719545
• Topic: Commerce
• Subtopic: Histoire des affaires

Begun as a social experiment in 1937, Air Canada has evolved into one of the world's greatest airlines.

Air Canada: The History explores a modern miracle that has made commercial air travel in our country an everyday occurrence. The airline was born in 1937 as "Trans Canada Airlines, " a ward of the Canadian National Railway. Renamed "Air Canada" in 1964 to reflect its status as a jet-age airline, it survived devastating air crashes, financial deficits, self-serving politicians, strikes, privatization, and the Airbus scandal. It was reviled in the nineties by the likes of Peter Newman, who joked, "If God had meant Man to fly, he wouldn't have invented Air Canada." Today it is a much loved national icon. Fortunate at times to be run by great CEOs like Gordon McGregor and Claude Taylor, Air Canada has fought off a hostile takeover, merged with its arch-rival Canadian Airlines, and touched countless lives during its 75-year history. This is its story.

Chapter One

The Railway Presidents

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The public first became aware on October 5, 1964. In all major Canadian cities, newspapers carried full-page advertisements in black and red: TAKE A NEW LOOK AT AIR CANADA. This was repeated in weekly and monthly magazines as well as roadside billboards across the country. Canada’s national airline was changing its name from Trans-Canada Air Lines (TCA) to Air Canada.

Company president Gordon R. McGregor wrote to all employees “with the object of clarifying the situation with respect to the company’s name.” The company, he reminded them, had been incorporated in 1937 as part of the Canadian National Railway under the name of Trans-Canada Air Lines. An amendment to the TCA Act in 1953 authorized the company to use the words “Air Canada” as a trade name for any purpose connected with the business of the corporation. “As time went on,” McGregor wrote, “the relative prominence given to the name ‘Air Canada,’ particularly in Europe, increased but in no case was the name ‘Trans-Canada Air Lines’ or its initials, TCA, abandoned.”

Bill C-2 had just been passed by both Houses in Parliament, the president explained, which had reversed the previous status of the two names, making Air Canada the primary and official corporate name with the company retaining the right to use Trans-Canada Air Lines as the trade name. The action had been taken to prevent the old name from being adopted by some other carrier. “I expect all of us will view the passing of the name Trans Canada [sic] with regret, and for those who feel strongly on this subject, it will be small consolation to realize that in a sense we brought it on ourselves. However descriptive the name Trans-Canada was in the early days, the rapid expansion in international operations made the old name poorly descriptive of the Company’s recent activities.” McGregor ended by commenting that domestically the new name had the advantage of having exactly the same meaning in both official languages.

The last point was intentional and clearly meant to emphasize that this time the change of name was going through. On May 14, 1953, an amendment to the Tran-Canada Airlines Act of 1937 had authorized the company to use the name “Air Canada” as a trade name, especially overseas. The name had been proposed for the whole airline in 1959, when the introduction of TCA’s jet service presented a perfect opportunity to update the company image. The reason the idea never gained altitude was tied to TCA’s origins and its unique relationship with Canadians. For from its inception, the company had always been much, much more than an airline….

Almost three decades old, TCA was a relative newcomer to commercial aviation. Unlike the United States and countries in Western Europe, until almost the Second World War Canada had no national airline — or any airline at all. Given the country’s vastness, inhospitable climate, and dual railway systems, it was accepted that commercial aviation in Canada would never pay for itself, let alone be profitable — and this had been repeatedly proven.

Below the border, when President Calvin Coolidge signed the Kelly Act in 1925, taking airmail delivery away from the post office and giving it to private contractors, he unwittingly began the rise of the American aviation industry. In a relatively short time, by 1933, when the ten passenger, all-metal Boeing 247 entered service with United Air Lines, its pilots flew (in heated comfort) along nationwide four-course radio range systems, performing instrument approaches at specially equipped airports. The DC-3 and Lockheed Electra that followed the Boeing 247 allowed U.S. airlines to operate on a schedule, at night, in poor weather, and, most importantly, at a profit.

Flying was still a fair weather exercise north of the border, restricted to whenever climate, visionary (or foolhardy) entrepreneurs, and available cash permitted. Commercial aviation in the Dominion was a precarious living for a passionate few, and not only because of the elements or the aged, open-cockpit, wood-and-wire aircraft they used. There were several air companies across the country that flew trappers, prospectors, missionaries, and Mounties to wherever the rivers or railways could not take them. But they were primarily freight haulers tied to the fortunes of the resource industries — mining and trapping — in the bush, and to stay aloft even marginally, the bush companies undercut each other to the point of bankruptcy. When Winnipeg grain financier James Richardson began Canadian Airways Ltd. (CAL) in 1927, he counted on the mining industry to keep it solvent. But even before the onset of the Depression, CAL was rarely out of deficit, and Richardson’s only hope for his airline’s survival was securing the airmail contracts for which he constantly lobbied the post office.

For in Canada it was all about airmail, the Internet of its day. The telegraph was not secure and was limited in scope as to what it could send. But without airfields, radio direction finders, or modern aircraft across the length of the country, all Canadian airmail, whether from Toronto to Vancouver or Halifax to Montreal, went south of the border and into the U.S. transcontinental mail system. Because Ottawa needed access to the U.S. mail system, it had to enlist American companies like Canadian Colonial Airways (which despite its name was owned by the Aviation Corporation of Delaware) to fly the mail between Montreal and Albany, New York, and United Air Lines to do the same between Vancouver and Seattle. Still coping with its overbuilt, ruinously duplicated railway system, with the exception of sponsoring a few flying clubs and building Saint-Hubert Airport, Montreal (for British airships), successive federal governments did little to encourage any aviation infrastructure. Civil aviation in Canada was controlled by the Department of National Defence, with the RCAF eager to fly the mail or perform any other civilian duties to give itself a raison d’être.

The Westbound Mail

The drizzling rain was falling,

A nearby clock tolled eight;

They watched the sky with an eager eye

For the Westbound Mail was late.

The rain beat down on the old tin roof;

The hangar chief stood by.

When the drumming tone of a motor’s drone

Came from the misty sky.

The beacon sent its welcome beam

To the flyer of the night;

He brought her down to the soggy ground

Down to the guiding light.

They swap the mail and shout, Okay,

And she roars and lifts her tail!

She’s up again in the rain and hail;

On with the Westbound Mail!

The crystals stick to the windshield

And form a silvery veil;

The icy struts, a man with guts

And a sack of westbound mail.

Over the peaks of the mountains now,

Clear of their treacherous rim;

Away up there in the cold night air,

Just God, the Mail and him.

His thoughts turn back to a summer night

And a girl, not so long ago

Who shook her head and firmly said,

“While you’re flying, No!”

He tried to quit the blooming job

And stick to the concrete trail;

But his wish came back to the canvas sack

And the feel of the Westbound Mail.

— Author Unknown

The federal government apart, the only institutions in Canada with pockets deep enough to bankroll the losing proposition that was commercial aviation were the two railways, the Canadian Pacific (CPR) and the Canadian National (CNR). These last were much more than locomotives, rails, and parlour cars; each had grown into multi-industry conglomerates, with interests in shipping, communications, hotels, and real estate throughout the Dominion, and in the CPR’s case around the world. Such a concentration of wealth and power in an industry was not unusual in Europe or the United States, but for a thinly populated country like Canada that could barely support one such railway, the intense rivalry between the CNR and CPR left little investment (or interest) in commercial aviation, thus keeping Canada firmly in the Railway Age.

In contrast, in Europe as the United States, commercial aviation had progressed far beyond the pioneering stage. In Britain, the Netherlands, Belgium, and France, an airline was not so much aircraft and pilots but a “chosen instrument” with which to fly the flag and bind distant colonies to the mother country. Completely state-owned or heavily subsidized, the fact that the “chosen instrument” ran at a loss and served only a fraction of the population was unimportant. It was a symbol of national prestige, much like the naval fleets of a previous era. What protected it from competitors both foreign and domestic were walls of regulations put in place by bureaucrats in London, Paris, Brussels — and later, Ottawa. Even in the United States, where the privately owned Pan American Airways was the country’s de facto flag carrier, so vital was Pan American’s survival to national prestige that the Civil Aeronautics Board (CAB), an independent agency the members of which were appointed by the White House, kept all rival airlines in a regulatory straitjacket. Airfares, routes, personnel, aircraft, and even onboard meals had to be approved by the CAB, which kept all contenders to Pan American’s international crown at bay.

Through the late 1920s, when these chosen instruments carried mail, colonial administrators, and tourists to distant parts of Asia and Africa, Canadians could only watch with envy. Britain’s Imperial Airways had begun with a single faltering flight to Paris in 1924 and had reached India in 1929, Hong Kong the next year, and South Africa the year after. Sadly, when Canadian commercial air companies were contracted in the Maritimes and Prairie provinces to carry mail (on the basis of the post office warning “Letters First, People Perhaps”), it coincided with the onset of the Depression. In 1931, Prime Minister R.B. Bennett cancelled all airmail contracts, telling the House of Commons, “… there was very little gratification in seeing an aeroplane passing day by day, when the unfortunate owner of the soil could hardly see the aeroplane because his crop had gone up in dust.” A former CPR corporate lawyer, Bennett held that taxpayers should not be paying for what benefited a few and which should be financed — as in the United States — by private enterprise.

The airline was named for the Trans Canada Airway that it was to operate on. Created as a relief project so that the RCAF could reinforce the Pacific coast, the airway made commercial aviation in Canada a reality.

What Bennett did encourage was an unemployment relief project called the Trans Canada Airway. Proposed by the Canadian Air Board as early as 1920, it was a cross-Canada network of airfields begun in 1929 that were sometimes equipped with runway lighting, radio beams for night flying, and meteorological and navigation aids. The airway hadn’t been planned for commercial aviation but as a defensive measure to allow the RCAF to move its squadrons across the country and reinforce either coast. By 1935, with aid of the thousands of able-bodied men, unemployed and homeless because of the Depression, this chain of airfields from Vancouver to Montreal (with a sideline from Lethbridge to Calgary and Edmonton) had almost been completed, and it was possible (in theory at least) for commercial aircraft to fly across the country.

Elected on October 14, 1935, the Liberal government of Prime Minister William Lyon Mackenzie King took full advantage of the airway’s near completion. On November 22, at a commercial aviation conference with Britain, Ireland, and Newfoundland, the Liberals brashly committed Canada to starting a transcontinental airline to operate on that airway. It was to be part of an Anglo-Canadian scheme where airlines of the British Empire would encircle the globe before the Americans did so.

King appointed Clarence Decatur Howe czar of all railways, marine routes, and canals — in effect, the country’s first minister of transport. A self-made millionaire, civil engineer, and aviation enthusiast (he was the only cabinet minister who had actually flown), Howe reorganized the transportation system with a ruthlessness that he would put to good use in the future war effort. Howe recognized that despite the Depression, commercial aircraft, like motor vehicles, had become competition to the railways. By creating a national airline, he sought to end the age of railway supremacy so that the CPR and the CNR were no longer the only means of transporting mail or passengers across the country.

With passage of the Department of Transport Act in 1936, the minister set about reforming Canada’s transportation system by taking it away from the military and the Board of the Railway Commissioners. The new federal Department of Transport consolidated the functions of the three departments: Railways and Canals, Civil Aviation, and the Marine Department, putting them all under the jurisdiction of the Board of Transport Commissioners and the minister of transport. The new board was more limited in authority than the former Railway Board; in the aviation sector, for instance, it could only approve licensing of rates for air service. To whom those routes were given, what aircraft it could buy, and whom its president and directors were would all be firmly under the jurisdiction of the cabinet, i.e. the minister of transport, stipulations that would protect (and hamstring) Trans-Canada Airlines/Air Canada for decades to come. Transportation policy after the First World War, whatever the government in power, revolved around maintaining a delicate balance between the two railway systems, one public and one private, and civil aviation (which in 1936 was viewed at best a minor supplement to the railways) fitted into that pattern.

Through his long political career, Mackenzie King committed himself to fighting what he saw as the stranglehold that the mighty Canadian Pacific, with its railway and shipping line, had on the national transportation system. From its inception in 1885, the CPR had been given a monopoly in most of Canada, and (in King’s view) was amply rewarded by successive Conservative governments with land and resource grants. King hoped that the nascent commercial aviation industry would not follow in the ways of the railways, i.e. with rivalry and animosity. But despite the prime minister’s efforts, the railway “curse” mutated into civil aviation, with Canada enduring two airlines, one public and one private, until the distant year 2000.

It would have been simple for the new Liberal government to buy up all of the bush air companies and rationalize them into a state airline. The British and French governments had done just that a decade before, taking over a number of faltering airlines in their countries to create Imperial Airways and Air France respectively. But having been burdened with ongoing problems when it merged several bankrupt railways from 1918 to 1923 to create the CNR (which it then had to prop up through continuous deficits), the federal government was loath to repeat the pattern with commercial aviation.

The only other potential contender was James Richardson, who, in anticipation that his airline would be chosen to operate on the airway, bought at great expense a pair of Lockheed 10A Electras, CF-AZY and CF-BAF, the first modern, fully enclosed, “wheels-up” metal airliners to be introduced in Canada. Richardson had heard that Howe favoured Lockheed aircraft over all others then available, and hoping to get the contract he enthusiastically proposed that a wholly new airline be set up using Electras exclusively. But the prime minister mistrusted Richardson, feeling he had been too close to the Bennett government, and Howe did not reply to his suggestion. If anything, the dismal record of CAL’s years in deficit proved that private enterprise did not have the political, financial, and technical clout to run an airline in Canada.

In order to defray the expected financial losses of an airline, the Liberal government initially encouraged both the CNR and CPR to buy an equal number of shares in the proposed venture, as they had done with Canadian Airways Ltd., in which each owned a 10 percent share. But for covering the operating losses of the new enterprise, the Department of Transport required absolute representation on the airline’s board, and of the nine directors, four were to be elected by the CNR’s shareholders and the remaining five appointed by the governor-in-council.

CPR President Sir Edward Beatty rejected this arrangement outright on the grounds that the CNR and cabinet board members represented the same interests, and if able to appoint five of the nine directors to the board, the government would dominate decision-making.

On November 26, 1936, Howe announced that a wholly new airline would be given the monopoly to fly the airway. A subsidiary of the CNR, it would be mandated to provide air transport services both domestic and international for mail, passengers, and cargo (in that order) throughout the country. Whether it made a profit was less important. It was to be a social instrument — an essential service like the provincially owned electricity companies or the Canadian Broadcasting Corporation, designed to bind the country together and withstand the encroachments of American and British interests. The purpose of the state-owned airline was to pursue social objectives, like joining the country “from sea to sea” and providing Canadians with a safe national and international air service. While the airline was to be run as a business, since it was a public utility it was not to make a profit. If it did so, it was obviously charging the passenger (who had already financed it through his taxes) too much.

The minister promised that as an instrument of national policy this company would guarantee a year-round daily air service, initially from Montreal to Vancouver, connecting all the population centres in be...