Volume 93, Issue 23

Thursday, October 7, 1999


NEWS

BOG's dog race ready to begin

Trent students want out of CFS

McGill cracks down on cheating

Over the knee could equal out of your tree

Customer is casualty in airline wars

Study clears up vision question

Stuff

Caught on Campus

Customer is casualty in airline wars



By Paul-Mark Rendon
Gazette Staff

Questions surrounding the fate of financially crippled Canadian Airlines and a possible merger with Air Canada has Canadian frequent flyers wondering if they will be left high and dry.

According to Douglas Reid, a business strategy professor at the Queen's school of business, Air Canada is currently trying to stave off a hostile takeover bid by Onex Corp., a Toronto–based conglomerate.

Reid explained if the takeover occurs, Onex will make the move to merge Air Canada with the ailing Canadian Airlines. Air Canada is seeking the financial backing of several other airlines, including Lufthansa and United Airlines, as well as the Bank of Montreal to make a counter bid on Onex's $5.7 billion offer, he added.

Reid said the prospect of a merger between the two airlines has raised the concerns of industry experts, as a monopoly in the Canadian airline industry would have adverse impacts on consumers.

Reid said if the two companies merge to form one giant carrier, the result would be a drastic reduction in choice for travellers. He added since consumers would have no other choice, they would be forced to pay more in travel fees.

"The moment you lose choice, your cost will go up," he said. "Travellers will probably have a less convenient flight schedule as well."

A merger may also mean the disappearance of seat sales because without competition to wage a price war, the airline is free to charge as much as it wants to, he said.

Reid added the implications of a merger have yet to meet with broad public interest. "The public has not yet caught on at all. They have some idea that a beneficent government is going to protect them vis-a-vis government regulations, but that's not necessarily the case," he said.

"The transport industry, from a company's perspective should be making profit, but from an airline's perspective should be serving people – competitive markets do that magnificently."

Jim Davies, chair of Western's economics department, agreed if the two airlines merged to form one company, the consumer would end up losing. "It depends whether or not they open the market up to international competition," he said.

Davies also agreed with Reid's concern that the absence of competition would serve to erase the consumer's control over price. "There would likely be an adverse impact if there are fewer producers in the industry," he said.

Benny Ling, a first-year masters of pharmacology and toxicology student from British Columbia, said he pays up to $500 for a ticket home each Christmas holiday. Since he cannot afford to go home more than once during the school year, Ling said an increase in ticket prices would only make matters worse.

"You'll have to deal with it if it does happen. I'll just have to look at alternate methods such as charter flights," he said.


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