An insider’s story of the rise and fall of
Canadian Airlines Under-capitalized, inflexible employment contracts, hostile government policies, volatile energy prices and economic upheaval
MY LIFE AND TIMES AT CANADIAN AIRLINES 1968 -1997 As told by a former Senior Vice President and Chair of the Council of Canadian Airlines Employees SID FATTEDAD F.C.G.A.
2 ~ Warfleet Press
Copyright 2014 Christopher Best All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted, in any form or by any means, without prior permission of the publisher or, in the case of photocopying or other reprographic copying, a licence from Access Copyright, www.accesscopywrite.ca, 1-800-893-5777 Warfleet Press 1038 east 63rd Avenue, Vancouver, B.C., V5X 2L1 www.warfleetpress.com All photos from the collection of Sid Fattedad Cover Photo: DC-10 aircraft, The Spirit of Canadian, 1994 Sid Fattedad returning from Victoria, 2005 Cover design by Christopher Best Text design by Christopher Best Edited by Dr. Robert S. Thomson Printed and bound in China Library and Archives Canada Cataloguing in Publication Best, Christopher 1949 An Insider’s Story of the Rise & Fall of Canadian Airlines The Sid Fattedad Story ISBN 978-0-9868793-1-9
Canadian Airlines ~ 3
CCAE Reunion Dinner - October 25, 2008 PHOTO RIGHT: BACK ROW: Jim Moynham, Spencer Dane, Sid Fattedad, Gary Boardman, Unknown, Sy Rosenman FRONT ROW: Bill MacAuley, John Dunlop, Bill Farrall, Dave Park
Ian Morley, Sid Fattedad & Larry Nelson
TABLE OF CONTENTS
Foreword......................................................................................9 Introduction..........................................................................................13 Chapter 1:
Growing up in Hong Kong, early memories of Canadian Pacific Airlines and passage to Canada ......................19
Chapter 2:
The long way round to getting hired at Canadian Pacific Airlines ............................................................31
Chapter 3.
The early days and some memorable stories...............37
Chapter 4.
Becoming “CP Air” and expansion fever.....................47
Chapter 5.
The strike of 1973 and poor financial results for a few years.............................................................................53
Chapter 6.
Orange is beautiful but only in the land of cherry blossoms and Watson Lake.........................................63
Chapter 7.
“The People’s Airline – better known as “Air Bus”.....67
Chapter 8.
Norfolk Broads – how I came to be nicknamed Kato..73
Chapter 9.
A brief mention of philanthropy among our people in uniform.........................................................................79
Chapter 10.
Some recollections of being head of corporate accounting and world-wide accounting operations......83
Chapter 11.
The “Kremlin” protocol................................................97
Chapter 12:
How ten tamales drove Colussy into flirting with buying
6 ~ Canadian Airlines
out Wardair. The follies of the McKinsey inquisition...................................................................105 Chapter 13.
A Tour Company with a difference............................111
Chapter 14.
The arrival of Don Carty and the beginning of the end of CP Air............................................................117
Chapter 15.
The Carty era – the consolidation of Canadian aviation.......................................................................123
Chapter 16.
On becoming a niche player – or Shetzen’s folly.......127
Chapter 17.
The land of the rising sun......................................... 131
Chapter 18.
FASB and how we lost the company..........................135
Chapter 19.
PWA – the takeover of CP Air and the emergence of Canadian Airlines...................................................139
Chapter 20.
Some funny things about a backwards take-over.......143
Chapter 21.
Wardair – finally and sadly!........................................149
Chapter 22.
Lessons for bad times - how and how not to improve the bottom line............................................................155
Chapter 23.
Pacific Division - the best of times, in spite of it all.159
Chapter 24.
Despite Colonel Rabuka’s coup – we kept our flights going into Fiji!................................................173
Chapter 25.
Reader’s Digest, Black Monday, Glenfiddich on the beach with the future Supreme Court Justice.......193
Chapter 26.
Bangkok inaugural, “the Sheriff of Patpong” and the
Canadian Airlines ~ 7
Loy Krathong festival...............................................201 Chapter 27.
The Quality Movement leads to a promotion and moving to Calgary – a case of the glass half full or....207
Chapter 28.
Prime Minister Mulroney visits the Far East. Pushing our luck at the Peace Arch border crossing..215
Chapter 29.
Leaving Canadian Airlines.........................................219
Chapter 30.
Gulf War drives Canadian into the arms of the enemy and the saga begins....................................................221
Chapter 31.
The birth of the Council of Canadian Airlines Employees (CCAE)...................................................237
Chapter 32.
The CCAE years and “the Order of the Salmon” – the glory of a fabled company’s employees..............235
Chapter 33.
How bureaucrats and politicians behaved.................261
Chapter 34.
It was never easy – being directors on the Board of PWA/CAIL.................................................................271
Chapter 35.
The party at BC Place in 1994 – a night to remember in my old age..............................................................283
Chapter 36.
Foresight is often regarded as crystal ball gazing.......287
Chapter 37.
Christmas dinner in a Crandall and Carty run airline..........................................................................291
Chapter 38.
The end of my involvement.........................................295
Chapter 39.
To our customers..........................................................297
Chapter 40.
In retrospect and some final thoughts...........................303
8 ~ Legacy Carriers
Postscript...........................................................................................309 Footnotes....................................................................................311 Appendix............................................................................................315 Glossary...................................................................................335 Index.................................................................................................339
Foreword
Some readers of this book, particularly ex CAIL employees, might still bristle over the financial sacrifices they endured during the employee rescue project of Canadian Air. They might be annoyed to read the caption “inflexible employment contracts were part of the mix that went into the failure of CAIL.” The term “Legacy carrier” is often used to refer to the cost problems of some well known names like Air Canada but that is not a finger pointing exercise against employees of those airlines. The work rules, wages and pension arrangement that hindered cost-cutting flexibility in times of sudden economic downturn, were negotiated by their
10 ~ The Canadian Aviation Industry
employers and union representatives in the time before fuel prices were more than 35% of total operating costs and world economies became tightly interlinked and recessions became global in nature. The “legacy cost” that has had the most significant impact on Air Canada has been unfunded employee pension liabilities and we all know that those pension promises were made so long ago that their original assumptions such as life expectancy and long term investment returns have gradually worked against the employers’ ability to fund the costs especially when capital markets tank like they did in the financial crisis of 2008 and the tech wreck at the beginning of the millennium. These are very large issues for legacy airline employees but non existent challenges for new low cost competitors who do not have similar contracts or pension benefit arrangements. I want to also point out that during the period from the early 1970’s till the beginning of the CAIL/ Air canada merger saga in 1992, there were innumerable episodes of layoffs and cutbacks in which fellow employees lost their jobs. Management and union employees were furloughed as a result of the difficulties visited on the airline industry, not the least of which were the continuous parade of economic upheavals and recessions (nine of ten post WW II recessions were preceded by oil price spikes). Not only did oil price hikes affect aviation industry expenses, the resultant economic contractions lowered revenues making these recessions a double whammy on airlines. Another often overlooked feature of the airline industry is the fact that
FOREWORD ~ 11
airlines rank dead last in terms of return on invested capital when compared to the value chain of industries involved in the aviation industry. This means that everyone up and down the value chain in the aviation industry found a way to make more money than the airlines they served. Median returns on invested capital for the period 1996 to 2004 for various value chain industries within the aviation system were as follows: 1) CRS (reservations business) - 24% 2) Leasing companies
- 13%
3) Ground handlers
- 13%
4) Fuel suppliers
- 11%
5) Freight forwarders
- 11%
6) Aircraft manufacturers
- 9%
7) Travel agents
- 9%
8) Caterers
- 8%
9) Airports
- 6%
10) Maintenance
- 6%
11) Airlines
- 3%
Source: IATA Study titled: Investing beyond oil and gas in the air transport sector, by Dr. Charles E. Schlumberger of the World Bank.
12 ~ A Honking Good Time
It is my sincere hope that this book does not stir up feelings of resentment between the employees of Air Canada, CAIL, CP Air, Wardair, PWA, Eastern Provincial, Nordair, Gemini and all the regional carriers. The aviation industry in Canada has a great deal to be proud of for its role in knitting our great country together over the past century. The journey has not been without its twists and turns, intrigue and politics, competition and rivalry. Such are the characteristics of capitalism and commerce and is bound to continue as the future unfolds.
Introduction:
Another name for this book could have been “A Honking Good Time” and for a good reason – it is about my life and times at Canadian Pacific Airlines that started its life with a Canada Goose image on its tail and ended its life with a rejuvenated Canada Goose design on its tail. In between these two images, the airline went through multiple corporate logo changes and this book tells the story of that journey from one man’s point of view. Many people have asked me to write such a memoir of my life with Canadian Pacific Airlines (later known as Canadian Airlines International, CAIL and over the years I have asked myself “What good would this do?” Many books on the subject have been written by authors who having combed through myriad documents and interviewed untold numbers of protagonists have written in great detail about the drama that was Canadian Airlines International. Peter Spigott’s superb
14 ~ Kai Tak Airport
“Wing Walkers” details the history and the legend of CAIL. Wayne Skene’s “Turbulence” gives more details about the trials and tribulations of the industry. We surely don’t need more books about rising costs and declining yields per RPM or the lengths to which the Canadian government will go to protect the interests of its baby, Air Canada, at the expense of tax-payers and shareholders. What convinced me to put pen
to paper to pay tribute to a great company is the fact that the great
brand and spirit of Canadian Airlines has refused to fade. In the minds and hearts of a great many Canadians, especially western Canadians, CP Air and its subsequent incarnation, CAIL, was a brand that attained near immortality. And many former Canadian Pacific Airlines people will never believe that fate dealt the right card when PWA turned up out of the blue to take it over. I want to dispel the notion – that it was a black hat (PWA) white hat (CP Air) affair. Almost every time I talk to anyone about airline travel, the subject of CAIL comes up with the lament “It’s never been the same since Canadian Airlines”. The magic and the mystique of Canadian Airlines survived what its many erstwhile owners did to it, and what some brilliant and not so brilliant managers did to it, and what the treacherous politicians did to it and finally, what some of its unions did to it. The magic of Canadian
Canadian Airlines ~ 15
Airlines survives because of its people and how they stayed together in spite of it all to nurture their “family”. To those who still fly and work in airplanes and hangars and airports and offices of Air Canada and any other airline today, I say – keep flying because it is in your blood to conquer time zones and bridge continents and I hope you will keep the “joie de vivre” and “esprit de corps” that was so special. The DC-10 aircraft that bore the signatures of employees was aptly named “The Spirit of Canadian.” I am also writing this book for the simple reason that I made a promise once upon a time to myself to tell the story as seen through my own eyes. This will inevitably mean that the book will reflect my own biases and beliefs. That cannot be helped. This book is about what I saw and felt. If any part of the book offends anyone, I assure you that no malice is intended. I am a confessed aviation junkie and proud of it. You have to have spent time near those giant flying machines as they spooled up their engines to taxi onto the active runway and then, with full throttle, lift themselves into the sky, before you can appreciate the sense of awe and wonder at being part of the miracle of flight. You have to have sat a dozen times behind the captain’s seat on approach to Hong Kong’s Kai Tak airport looking at the checkerboard on a hazy night and grip the back of his seat when the aircraft banks at a perilous angle, seeking the runway that suddenly jumps into view (from the top of the windscreen) at the
16 ~ Canadian Airlines International (CAIL)
last second. You have to have flown through thunder storms and seen St Elmo’s fire flashing across the windscreen on approach to Don Muang airport in Thailand. And finally, you have to have been with the cabin crew who improvised mid-flight by using empty bottles to unplug toilets on a long 14 hour trans-Pacific flight. Yes, Av Gas and other fumes get in your nose and in your hair and you never can forget the sensation. Along with a host of people who have helped me with this memoir, I am hoping to capture for posterity some of the views, impressions and actual experiences surrounding the story of Canadian Airlines International (CAIL). It will be almost inevitable that personal biases and beliefs will be presented, but it is not my intention to distort or impugn the reputations or intentions of people who were involved. In fact, I want to state up front that never did I ever believe there were bad people in this play – they were all well-meaning and were to greater or lesser extent part of the fabric of the legend. I have also weaved in stories of some of the airline’s employees and their aspirations, hopes and achievements that paralleled the story of Canadian Airlines. I will tell some stories of “Rahul Bhatia,” our man in India who is now the proud owner of Indigo Airways in India and was voted Indian entrepreneur of the year in 2011. There are others: Franz Metzger our man in Narita; Manob Song Im, our man in Bangkok;
Canadian Airlines ~ 17
Jimmy “the Greek” Melidones, the Icon of YVR; Dave Solloway, our wandering Asia hand who literally blew off his hand in Thailand, Tony Buckley, whose kids grew up speaking Japanese, and many others who may find themselves revealed in these pages. To each of those mentioned and others who may feel they should have been highlighted, I extend my grateful thanks for their friendship and help along the way. When I left Canadian Airlines International at age 48 in January 1992, after 24 years of service to the company, I had no suspicion that I was opening a door to the most tumultuous, energizing and difficult three year period of my life. In fact, soon after I retired I headed off to Europe with some airline diehards from the “Norfolk Broads” days (that’s part of the story) to “conquer” the Canal du Midi in the south of France. I had no thoughts of business or the challenges the airline faced. When I left in January 1992, the airline was deep in talks with American Airlines to sell them a stake to financially stabilize the company. Looking back, I suspect that the Gulf War and the ensuing oil price spike and recession did not help the efforts of Rhys Eyton and Kevin Jenkins. Joss [1] played a part here as it did many times in CAIL and CP Air’s history. In the fullness of time as we look back on the AMR saga, the irony of its own inevitable entry and passage through the Chapter 11 purgatory in 2012 should remind us all that none of the big US carriers had a silver bullet that could slay the awesome destructive power of something called “low cost carrier.”
18 ~ Kowloon City
Never in my wildest imagination would I have believed that the events that would unfold from 1992 to 1995 would so change Canadian aviation and the lives of so many of my friends at CAIL. But I found myself thrust into an adventure that took me to the very depths of intrigue and treachery, the very best of sacrifice and camaraderie and most importantly a chance for me to serve my fellow CAIL employees that has garnered so much goodwill and kindness shown towards me even to this day. I am often touched beyond words by the courtesies shown to me by airline employees on my travels. After all, it isn’t often that one is recognized, let alone welcomed by employees twenty plus years after leaving a company. My only regret is that I can’t remember all their names even though I remember their faces. And so, with grateful thanks to all the employees of CAIL and its predecessor and constituent companies, I dedicate this recollection of one man’s journey in the life and times of Canadian Airlines International. I hope you will enjoy reading this as much as I have enjoyed reliving these stories and reconnecting with old friends.
Chapter 1 ~ Growing up in Hong Kong, early memories of Canadian Pacific Airlines and passage to Canada
Before Kai Tak airport became renowned for its runway jutting into Kowloon Bay, it was a favorite fishing hole for me in 1954 when I was just ten years old. Kai Tak airport sat right next to the infamous Walled City and in order to get there I used to stroll along Boundary Road that skirted Kowloon City and the Walled City within it. My mother, bless her heart, always reminded me not to go wandering into the Walled City, a noisy, filthy den of inequity, and especially never to eat the food from the “dai pai dong” - street food stalls. But true to my adventurous ways I always detoured into Kowloon City to experience the smells, tastes and sounds of old China - brisket noodle soup, salted fish, dried cabbage, and pickled thousand year eggs became familiar and comforting things for me. I didn’t know it at the time but there was also the occasional cloying sour-sweet waft of air that comes from smoking that
20 ~ Nancy Kwan
tar-like substance from deep inside the opium dens of the Walled City. Sometimes on weekends I would take my jerry-rigged bamboo fishing pole along with some red worms for bait to sit on the rocks at the side of Kai Tak airport for hours waiting for the guppies to bite. I still remember vividly how one particular aircraft captured my attention and imagination – “Canadian Pacific” was written along its fuselage. I wondered what the country called Canada was like and I often dreamed about going there one day – but at that age those thoughts were fleeting, especially when the guppies were biting and there was fun to be had. At that time I was unaware of the fact that Canadian Pacific Airlines was running a highly profitable air service shuttling a constant flow of Chinese refugee migrants who were sponsored by their relatives in Canada, “the golden mountain uncles”. My parents found me to be the most challenging of their five children and although I often worried them with my frequent long absences from the house they gave me nothing but freedom to explore. Looking back, this freedom to roam was probably what turned me into a bit of a wanderer with a nosey interest in everything. It also eventually brought me to Canada in 1968. I was born in Guilin, China in 1944. My father’s background was
Chapter 1 ~ Hong Kong ~ 21
Persian, my mother’s Chinese. They had escaped from Hong Kong when the Japanese overran it in December 1941. My parents returned to Hong Kong in 1946 and picked up their life from where they left off – he being an import-export merchant and she being the tai-tai with a growing brood of children. We lived in the posh suburb of Kowloon Tong in a walled compound at No.18 Dorset crescent and had amahs, wash and cook servants, a driver, several gardeners and chickens. Our house had an annex that served as living quarters for Mr. Dewhurst, an ex-pat Englishman who was the company secretary of my father’s trading firm and I learned early from him how toast is to be made and how marmalade is spooned. Dewhurst was my first exposure to “Gwei-Lo”(a foreigner) I remember the stereotypical striped suspenders that he snapped while reading the South China Morning Post at breakfast. I went to junior school at Kowloon Tong School and spent my childhood frequenting the Kowloon Tong Club, a retreat reserved for the well-off of the era. My brothers and I cavorted happily in the playground where we made friends with Nancy Kwan of “Suzie Wong” fame. Nancy was a Eurasian girl whose Chinese father and English mother produced a strikingly good-looking girl who later turned into an international star and celebrity following her Suzy Wong role opposite William Holden. In my pre-teen years, I frequently made off with my father’s 22 caliber rifle up to the hills footing Lion’s Rock for the purpose of target
22 ~ The Kontinentals
practice in which the targets were earthenware burial pots filled with the bones and ashes of villagers. It caused my mother no end of consternation when I used to come home brandishing a femur bone or two with great pride while the dogs went crazy! Lovely red Irish Setters, the pair of them! I attended middle school at St. Francis Xavier’s College (SFX) in Shamshuipo in Kowloon and nothing remarkable happened there except for the fact that Bruce Lee (of Kung Fu fame) was my classmate for a few years. SFX was run by Marist brothers whose teaching philosophy seemed to be that corporal punishment was the best way to ensure that children paid attention in class and save them from the curse of scholastic failure – (Well, at least that was what I thought). Accordingly, the many canings at the school helped me to pass the standard examinations that entitled me to graduate from middle school with the HK School Leaving Certificate in hand. Bruce Lee was quite a colorful character in school and his most famous deed was a boxing match with Brother Edward, a big brute of a man who was more than twice the size of Lee. Our whole class was treated to a most entertaining bout in which Lee came out unscathed while Brother Edward was thoroughly thrashed! Sweet revenge for all the boys and Bruce Lee was a school hero after that. I left SFX after passing the standard exams and joined King George V School (KGV) to write the UK General Certificate of Education. KGV was an
Chapter 1 ~ Hong Kong ~ 23
amazing experience for me because for the first time in my life, I was thrust into an environment where students of every imaginable colour, race and religion mingled in friendly harmony and where corporal punishment was a last resort! That was important! I think that in the three years that I spent at KGV I became comfortable with the idea that different nationalities should not be a barrier to peaceful co-existence. However, I must admit that in spite of the peaceful and harmonious routine the usual amount of teenage scraps and competition went on such that my teenage years were interesting indeed. There are so many stories from that era that they could fill another book. From 1963 to 1966 a group of KGV school friends and I formed a rock and roll band that became quite famous in Hong Kong. Known as the Kontinentals we were young men with musical talent that was probably more imagined than real but somehow we became the top band in Hong Kong. We had our very own weekly TV program and great fun was had by all. My best memories of our stint at stardom include being opening acts for the Kinks, Manfred Mann, Lulu, Chubby Checker and many other rock stars of the day. Sadly it all ended when our lead singer, Anders Nelsson, had to enroll in the Swedish military and other members of the band also left to pursue post secondary school educations or careers. In those days almost none of my group of ne’er do wells thought of college after high school. I was persuaded by my then
24 ~ KPMG
girlfriend’s father, Bob Baker, who was Corporate Secretary at Hong Kong Land Development Ltd., to end my beachcombing days. He arranged for me to join Peat Marwick Mitchell and Co. (KPMG today) in Hong Kong as an articling clerk. I did so and that launched me on a financial career that has taken me so far beyond my expectations that to say I owe Bob Baker a lot would be an understatement bordering on ungratefulness. But that’s another story. My next heightened awareness of Canadian Pacific Airlines was in March of 1966 when I read newspaper coverage of the crash of Canadian Pacific Airlines flight 402 at Haneda airport, Tokyo’s international airport at that time. The flight originated in Hong Kong and was scheduled to touch down in Tokyo to pick up more passengers and then fly on to Vancouver. Of the crew and passengers of 72 people, eight survived the crash. I can recall thinking how sorry I was to read that tragic news. There was no reason for me to feel that way except that I had an image of the goose on the tail of that airline company. I was sitting in the offices of KPMG - it was lunch hour at the time and that afternoon was shot for me as I wandered around in a daze without much of an idea why. In the summer of 1967 I received a long distance phone call from Vancouver from my friend and fellow ex-Kontinentals rock band member, Danny Piry. He had left Hong Kong in 1966 to study in Vancouver and
Chapter 1 ~ Hong Kong ~ 25
was phoning to ask if I would consider coming to Canada to join up with the band again. I think it took me about twenty seconds to ask him to repeat that question and say “Yes, I’ll be there tomorrow!” When one is young and immortal the thought of pulling up stakes and moving to another country doesn’t invoke thinking about the serious consequences that such a move entails. Most of my work-mates at KPMG were shocked that I would give up four years of articling to go and play in a band but they gave me a great send off anyway when the time came for me to say farewell. As it turned out, formalities such as Canadian Immigration and travel documentation held up the process so I had to endure almost six months of my parents not speaking to me. Their disappointment that I would quit a reputable job at KPMG was palpable and it was probably the most miserable six months that my family ever experienced. But before I finally left for Canada there was another piece of news about another Canadian Pacific Airlines crash: in February of 1968 a leased B707 on a flight from Honolulu to Vancouver crashed on landing at Vancouver airport. This news did little for my flight jitters as I approached the day when I would board that flying goose to Canada. At long last the day of departure came. It was St. Patrick’s Day, Sunday, March 17, 1968 when I got on board a Canadian Pacific Airlines DC8 in Hong Kong to emmigrate to Vancouver. I paid a one way
26 ~ Marcus Lung
ticket price of something like HK$600 which was almost all my back pay and vacation pay from KPMG, I remember having only about sixty dollars US in my pocket as I prepared to board the plane. At the very last minute my father, who hadn’t spoken to me for months but drove me to the airport along with the whole family to see me off, slipped four hundred US dollars into my pocket and said, “Good luck Son, all the best”. I think he had in mind that once that money ran out I’d be back in Hong Kong. As I write this memoir, I am collecting my Canada pension after 45 years here – so much for going back! “So kiss me and smile for me Tell me that you’ll wait for me Hold me like you’ll never let me go Cause I’m leavin’ on a jet plane Don’t know when I’ll be back again Oh baby, I hate to go”
.
Leaving on a Jetplane, by John Denver The 15 hour flight to Vancouver seemed both a blur and an age at the same time. The hours passed quite quickly but each minute seemed like hours.Thoughts of family and friends; awareness of minute details of sights and sounds within and without the aircraft; wonderment and anxiety about the future; regrets about things left unfinished,
Chapter 1 ~ Hong Kong ~ 27
relationships left behind and words left unsaid; whether to order another free scotch that came in miniature bottles. Come to think of it, I remember the male cabin steward, Marcus Lung, as if I saw him only yesterday because he was so kind and attentive to all the passengers on the flight. I never had to ask for another miniature; they arrived with regular monotony. In later years as I became a fixture on CP Air flights, I would meet up with Marcus many times and he always reminded me of how many miniatures he brought me on my first flight! I was seated at the very back of the DC8 aircraft and the cabin was almost empty on the leg from Hong Kong to Tokyo. My dinner came on a tray with nice porcelain dishes and the cutest little umbrella spear that protruded from a pineapple round. I spent some time opening and closing that little umbrella and then I carefully wrapped it in a clean napkin and stowed it away for a souvenir. When we arrived in Tokyo a diminutive Japanese man came on board at the front of the aircraft calling out something like “All con passengers please disembark and wait in the holding lounge.” I had no idea what this was about then but it was to be the scourge of my existence for a few years! That little man was the terror of Canadian Pacific Airline’s staff at Tokyo airport and every employee who has ever heard him call out for cons (airline vernacular for contingent passenger) will remember the dreaded experience of being “bumped off” the flight in Tokyo! This was because even though
28 ~ Five Man Cargo
the flights might have had lots of room from Hong Kong, they would fill up in Tokyo with paying passengers and if you were an employee, the lights and sights of Tokyo beckoned! After we took off from Tokyo the captain announced on the intercom that our trip would take us over the international dateline and we would actually gain a day! He joked (at the time I didn’t know that it was a joke) that he would let us know just before we crossed the date line as we would probably feel a bump as we went over it. I was wideeyed and excited as all get out during that eight hour crossing of the Pacific from Haneda airport. I stayed up all night – looking occasionally out to marvel at the stars visible through the window. I wondered if I would ever come this way again. After all, Canada was something like 7000 miles away and people don’t travel all that distance very often, do they? I arrived in Vancouver on the same day that I left Hong Kong and had St. Patrick’s Day all over again on Sunday March 17th, 1968 in Vancouver. The idea of gaining a day was unfathomable to me and to this day it is an article of faith that this date line change thing is not voodoo. My arrival was greeted by former Kontinentals band members Danny Piry, Gerald Laishley and John Telling and they brought newcomer bass player, Orly Anderson, along with a bunch of Canadian
Chapter 1 ~ Hong Kong ~ 29
guys and girls who all came to see me at the airport. That same day the guys drove me down to Tartini’s drum shop in New Westminster where I plunked down $300 US for my Ludwig drums and signed a promissory note to pay $45 a month until it was paid off. I had no idea what this credit system was since one always paid cash for things in Hong Kong. Our band in Vancouver was known as the “Five Man Cargo” and quickly established its presence in the local music scene. Our popularity was such that the $300 investment in those drums was paid back many times within a year and our weekends were booked solid at Point Roberts’ famous weekend party spot known as “The Breakers.” Point Roberts is a finger of land that juts out from the Canadian mainland and is bi-sected by the 49th parallel which puts the southern half of the finger in American territory! There is no road access to mainland USA from Point Roberts and it was a favorite hangout for young Canadians wanting a weekend of booze and fun (the liquor stores closed weekends on the “dry” mainland of Vancouver). On July 20, 1969, we were playing at the Breakers when Apollo 11 “the eagle” landed on the moon and Neil Armstrong and Buzz Aldrin halted proceedings for almost an hour while the customers crowded around several TV monitors to watch and listen to Armstrong’s words. “One small step for man, one giant leap for mankind”. Funny how one remembers things.
30 ~ Bruce Allen
As we became more and more popular and in demand we went about searching for a full time manager for the band and one day John Telling, Gerald Laishley and Orly Anderson came into the club with a fellow in tow – “Meet Bruce Allen. He is going to be our manager!”. No one in the Canadian music scene needs reminding who Bruce Allen became. Yes, Bruce Allen started his career as the manager of the Five Man Cargo in Vancouver. And yes, he was just as bombastic then as he is today. During the week we were booked mostly at “Lasseter’s Den,” a nightclub owned by Bill Lasseter, a rather famous defensive back on the BC Lions football team. Later we were the house band at the Marco Polo night club in China Town where we played with the likes of visiting stars and bands including Ike and Tina Turner, Herman’s Hermits and The Platters. My most unforgettable character from those days was Harvey Lowe, a local-born Chinese celebrity who was the Master of Ceremony at the Marco Polo night club. Harvey had won the World yoyo championship in 1932 in London, England and held that title until he passed away in March 2009. Harvey had met and mingled with celebrities and ordinary people from all walks of life but I never knew he was a celebrity himself as he was always selfless and obliging. The only thing that gave him away was his tendency to bring out a yoyo and fling the thing towards the ground to create the spin that sets the yoyo up for a walking-the-dog trick! Later in life, Harvey worked for Vancouver Airport (YVR) as a meet and greet host and I would run into him in the arrivals area greeting people from the Cathay Pacific flights.
Chapter 2 ~ The long way round to getting hired at Canadian Pacific Airlines
Because I was a “valued” staff member of KPMG in Hong Kong, upon hearing of my plan to move to Canada, the partners referred me in March 1968 to the Vancouver office of KPMG for possible employment. A few days after arrival in Vancouver I went to a meeting with Mr. Kinninmont, the staff partner. He was expecting me but was very apologetic as he told me that the Institute of Chartered Accountants had just passed a rule that would prohibit anyone without a university degree from qualifying for the designation of Chartered Accountant. He did say that I would be welcome to work at the firm but there was no chance of my becoming accredited as a C.A. in Canada. He went on to offer a salary of $200 Canadian dollars a month! I had earned $35 the night before playing with the band at Lasseter’s den and somehow $200 a month didn’t compute for me – so I thanked him and declined the job. So much for being a valued member of KPMG in Hong Kong! In later years
32 ~ John Huscroft
I was to discover that my best friend from those days in KPMG, Freddie Han, had stayed in the Hong Kong office and was subsequently sent to the London office of KPMG where he was able to article and become a C.A. and went on to become a partner in the Toronto office of KPMG. Joss again! (1) So instead of going to work at an accounting firm the next best thing presented itself the day I left the KPMG offices – I looked across Hastings Street and there stood a small but imposing building with the name emblazoned on its façade: “Richardson Securities”. I looked again and saw a “Now Hiring” sign so I wandered across the street, entered the building and saw a huge almost cavernous trading floor with lots of people gesturing with their hands and others writing down what appeared to be numbers and names on a floor-to-ceiling blackboard. This was a stock brokerage and I thought, why not? It’s all about numbers. So I enquired and was accepted and hired shortly after as a customer account clerk. I posted daily stock transaction slips for Richardson’s customers in a basement office below the trading floor. This would hold me until something comes up, I thought, not aware of the unknown irony that I was working for the very company that gave birth to Western Canada Airways (WCA) which later, through a series of mergers and amalgamations, became Canadian Pacific Airlines. In fact, the goose that was emblazoned on the tails of early Canadian Pacific Airlines’ airplanes was
Chapter 2 ~ Canadian Pacific Airlines ~ 33
first chosen by James Richardson as the logo for his airline, WCA. Joss [1] John Huscroft was a Creston boy whom I was rooming with in an “animal house” on West 14th Avenue in Vancouver. John was the son of a wealthy sawmill mogul in Creston B.C. and he had the worst case of chronic asthma I had ever seen but that did not stop him from becoming the band’s road manager. He gamely carried our equipment to and from the van whenever we were on the road. John possessed one thing that overcame his asthma challenge: he owned and drove a canary yellow Pontiac Firebird with a tachometer on the hood! Girls didn’t mind his asthma so much when they got a ride in that muscle car. One afternoon in late June 1968 John took me for a spin out to the airport. He liked airplanes and enjoyed watching them take off and land. We drove past the Canadian Pacific Airlines administrative building which was adjacent to the hangar that ran alongside the south arm of the Fraser River, very close to the south landing strip better known as runway 08R/26L. I noticed a “Help wanted” sign posted at the entrance next to the gate and it popped into my head that I should ask John to drive into the compound. Walking into the store front that masqueraded as a hiring office, I enquired of a blond lady behind the counter what jobs were available.
34 ~ Harold Thomas
She looked at me in a funny sort of way. Maybe it had to do with my shoulder length hair and skinny, boyish looks but she had probably made up her mind that I wouldn’t fit the mould. She said there was a junior accounting clerk position open but when I explained my four years of articling experience at KPMG in Hong Kong, she developed two solid excuses to deny me even an application form, the first being that I was “over qualified” and second, I had “no Canadian experience”. I don’t know how many new arrivals to Canada have heard those two lines before and since but if I had a dollar for every one I’d be richer than Warren Buffett today! I suspect that’s why we still have qualified doctors and nurses from foreign countries driving cabs and washing dishes in Canada today. I have no idea what took hold of me, but without saying another word I opened the counter door (some people who were there that day have even suggested that I hopped over the counter, but that was urban legend), stepped past the lady and went into the corridor behind her saying “I think I should talk to someone else”. And I walked into the office of the manager in charge of hiring with the blond lady trailing behind me in protest. The fact that I woke him up from his nap probably explains why he didn’t have me ejected on the spot, but he waved the blond lady away and sat listening to me for a few minutes and then he said, “I want you to meet Harold Thomas, the manager of corporate accounting. He
Chapter 2 ~ Canadian Pacific Airlines ~ 35
may have a job for you.” He made a call to Harold Thomas who saw me that afternoon and hired me. Harold, who would become one of my best friends, sported a Friar Tuck look with a jovial but slightly pained smile and was in his late thirties. He interviewed me for about 15 minutes and decided to give me a chance by offering me the posted job in his department. I still remember him saying, “You might think about getting a haircut before reporting for work on July 12.” I didn’t know whether it was a preference of his (because he was bald) or because it was company policy! He also told me that as a junior accounting clerk I would naturally have to join the union which at that time was the Brotherhood of Railway and Airline Clerks (BRAC). Thus my first job in Canada taught me that unlike Hong Kong where unionism was almost unheard of, Canada’s work environment was governed by a labour relations regime. I asked what circumstances would enable me not to have to join a union. “Become a manager” I was told. That, I promised myself, would be what I would do, as I started my 24 year career with Canadian Pacific Airlines. But before I even started I chalked up a demerit with my immediate supervisor. You see, I slept in on July 12, 1968, my start date, and was woken up in mid morning by a phone call from Art Dodd enquiring when he might have the pleasure of my company or should he hire someone else? Needless to say, he was less than impressed when I walked in after lunch on my first day of
36 ~ Judy Fisk
work! I had not had a haircut either. Art Dodd was a nice enough guy – a bit on the large side and shorter than average, with thick glasses that amplified his eyes when he looked at you giving an expression that implied disbelief in everything you said! He told me that it would be his pleasure to conduct my three month probation interview when I leave! Much to my relief, a lady came to my aid. Marie Read, who was the Section Clerk in my department and second in command to Art Dodd, stepped in and steered me towards a less acidic relationship with Dodd by persuading me that he was well-meaning and not really so bad.
In those early days I was very lucky to have been “adopted” by a very kindly older lady by the name of Elaine Dickie who was the senior clerk of the Payroll department. I hadn’t been there but a few months when Elaine, who had been planning a trip to Hong Kong asked me for some pointers about what to see and do there. I insisted that she meet my parents and arranged for her to meet with them. When she came back from Hong Kong, she told me that she had met my parents and they had taken her to the Hong Kong Country Club and had been very hospitable. She also said that she promised my mother she would keep an eye on me in Canada. Elaine was to become a very close friend and I used to refer to her as my “Canadian Mom”.
Chapter 3 ~ The early days and some memorable stories…….
My early days at Canadian Pacific Airlines were pretty uneventful. I was assigned the clerical task of posting the sales of money orders from our worldwide offices. Making my daily task very pleasant was the fact that Judy Fisk delivered the sales reports that came in from CP offices all over the world. Every male in the office told me that were it not for the lousy pay they would want my job because Judy came to see me every day! Judy was really rather a stunning blue-eyed blonde but she had a personality that was even more likeable and I enjoyed her ready smile and good humour as she tolerated all the goofy grins and stares from the guys in the office. Judy was no pushover, however, when it came to fending off unwanted advances from the males and she demonstrated that by driving the brand new Mustang GT muscle car of the kind that Steve McQueen made famous in his 1968 movie “Bullitt”. I must admit that when she invited me to go for a ride in it I thought I
38 ~ Art Dodd
had died and gone to heaven! I think there was an even better perk for me in that job. Every day I came across a different place in the world that Canadian Pacific Airlines operated. Names such as Amsterdam, Madrid, Lisbon, Santiago, Buenos Aires, Lima, Watson Lake, Whitehorse, Sydney, Auckland, Nandi and Honolulu all conjured up images that stimulated my curiosity about those faraway places. I wondered what they were like, what kind of industries they had and what determined the exchange rates between those countries and the Canadian dollar. It would be for me the foundation of what has become a life-long involvement in the world of commerce and economics. Another job of mine was a grisly one that ironically linked back to the Tokyo crash of 1966. I reconciled the ledger that held the records of all the personal property found at the scene of the crash. That ledger contained records dating back to the crash of the Empress of Hawaii, a brand new De Havilland Comet Jet which failed to lift off in Karachi in March 1953. The aircraft was on its maiden delivery flight from the UK and all 11 crew and passengers died including some senior management members of Canadian Pacific Airlines. This was not a job that I liked very much and it was a blessing that there were almost no transactions in those accounts except for the occasional legal notice or invoice.
Chapter 3 ~ The Early Days ~ 39
After a while, I had the job down pat so that I was able to complete my work by mid morning with nothing to do for the rest of the day. I would ask my boss, Harold Thomas, if there were other jobs I could take over doing or help other clerks with. He confided to me that if I did that I would alienate the union. In fact Art Dodd, the supervisor of my department, often told me to sit down at my desk and look busy if I had nothing to do! It was not long before I discovered a great afternoon siesta spot and I was often to be found asleep in the hangar adjacent to the office block. I nestled down among the spare first class seats on the mezzanine of the hangar and snoozed sometimes for a couple of hours. My night time work as a rock and roll drummer was taking its toll, you see. After he was informed that one of his staff was sleeping in the hangar, Harold Thomas finally decided he should assign me to work on the airline’s fixed asset accounting just to keep me busy. That work was classified as section clerk (higher than junior clerk) duty. I devoured that assignment like there was no tomorrow and soon afterwards Harold gave up and assigned me even higher level work including tax reconciliation of fixed assets. It was quickly becoming clear to everyone that I was capable of carrying out any and all assignments without question. In fact, just two months after I started at CP Air, Harold suggested that the airline would support and pay for my enrollment and tuition fees in the Certified General Accountants Program offered through the University of British Columbia with the commitment that as long as I passed
40 ~ Terry Byrne
the courses, I would not have to repay the tuition. This was an act of generosity that was very gratifying and unexpected. It was also almost unheard of that the company would make that kind of commitment to a brand new employee who had not yet even passed the probation period. In turn, I made a commitment to the company by quitting the band which had become one of the most successful rock and roll bands in Vancouver at that time and was providing me a monthly income greater than what the airline paid me in my day job. I also quit because the band was engaged to do a three-month tour of the US mid-west which would have meant having to quit the airline job and missing out on a whole term of my accounting program, both of which I was not prepared to sacrifice. The band’s manager was later to become famous as Bruce Allen, the entertainment kingpin of Canada best recognized for his management of Bryan Adams and other big names in entertainment. He cut his teeth in the business by managing the Five Man Cargo. Life was not at all bad for a new immigrant from Hong Kong. I made lots of good friends and among those were two memorable characters, Al Skeith and Terry Byrne. Al worked in cargo accounting over on the revenue accounting department side of the building. He was a dapper dresser and always cheerful with a ready smile for everyone. He was also a sports car enthusiast. He owned the most beautiful British racing green Austin Healey sports car that he drove to work once in a blue
Chapter 3 ~ The Early Days ~ 41
moon and then would spend the whole day fretting that someone might scratch it in the parking lot. Al had his car stolen eventually and this broke his large and generous heart. Terry Byrne sat behind me in the corporate accounting department. He was a charming fellow with a wry sense of humour. Terry had wispy reddish hair and the freckles common to redheads. He was helpful to me in many ways. He quickly made me feel welcome to Canada and introduced me to the staff by accompanying me to the canteen at lunch times and during breaks. He was also prone to doing unusual things. He came into the office one day and announced to everyone that he had just climbed Mount Kilimanjaro. Everyone knew he had been on holidays but when he showed us photos of his trip we were all amazed by his tale of adventure. Having come from Hong Kong where my furthest thoughts of travel were how to get across the harbor after midnight the idea of going half way around the world to Africa to walk up a mountain was rather novel. Al, Terry and I became fast friends and they often came down to the night club to watch my band play. Terry introduced me to the Haight Ashbury district in San Francisco in 1968 when Scott McKenzie wrote, “Come to San Francisco with flowers in your hair” a bucket list item for all the hippies and free lovers in the world! We flew down to the city by the bay on a whim and spent a most enchanting time in Golden Gate Park among the Frisbee-throwing throngs and that sweet smelling-stuff that came from their cigarettes!
42 ~ First Officer Ken Kaplan
Another story etched into my memory was the Merritt incident. The band I was in had a high school graduation dance gig on a Friday evening in Merritt B.C. in the summer of 1968. As I had started work just a few weeks earlier I could not ask to be excused from the office to drive up to Merritt with the band on Friday morning. So Terry Byrne offered to fly me up to Merritt after work at 5 p.m. as he had a private pilot’s license. So, off we went after work and flew up the Fraser Valley. It was about an hour away in a Cessna 152 and we arrived at Merritt airport around 6 p.m., parked the plane and hitched a ride into town where the band was waiting at the local high school, ready to go. We were into our second set around 9 p.m. when the RCMP arrived. They were looking for the pilot of the Cessna 152. Apparently Terry had forgotten to close his flight with the control tower and an aircraft missing alert had been issued! The evening didn’t end without further incident because as we performed one of the more raucous “Animals” songs I kicked my drums off the drum stand only to start a mini riot in the auditorium as the local high schoolers let loose! The punch line to this story would come some 35 years later when I returned to Merritt. This time I was the CFO of the Workers Compensation Board and I was there to meet the CEO of a local sawmill that had attracted our attention with poor safety performance. I was there to deliver the message to the boss that if they didn’t shape up they would face financial penalties. The CEO across the table who had been staring at me intently while I was speaking suddenly sat
Chapter 3 ~ The Early Days ~ 43
up and exclaimed, “You’re the drummer who started the riot at my high school grad dance!”. You can imagine how that conversation went. The ice was broken and we got into a real discussion about safety and what he would do to improve things at his sawmill.. Among the memorable events in those early years the following story deserves special mention: The only oceanic flight in CP history that did not reach its destination It was not a dark and stormy night but rather a nine a.m. departure on December 19, 1972. It was our stretched DC8-63 aircraft, tail number CF-CPO, with a full load flying from Vancouver to Honolulu. The three flight crew members were Captain Jim Forbes, First Officer Ken Kaplan and Second Officer T. Keys. The average flight plan wind speed for the trip was 80 knot head wind with an indicated average ground speed of approximately 400 knots. Approximate flight time was six hours to travel the 2,400 nautical mile distance. In 1972 all navigation was by Inertial Navigation System (INS computer) and navigators were no longer part of the flight crew. Therefore the pilots were responsible for all oceanic navigation and fuel
44 ~ CP Air
calculations, duties previously allocated to the navigator. On climb out from Vancouver the wind at flight level 20,000 ft. was approx 230k - well above flight plan - somewhat disconcerting but not indicative of what was to come. On reaching cruise level (35,000 ft - the wind was 260 k right on the nose - full headwind with the ground speed being approximately 220 k - which is about 180k below the planned groundspeed. A short time later ground speed decreased to 210k as the wind picked up to 270k. The unusual thing was that the ride was still relatively smooth. Normally it would be quite rough with high wind speeds. The captain’s thinking at that point was that they would fly out of the jet stream in due course as it was still early in the flight. The crew reported their situation to dispatch (as it was called in those days) who promised to get back to them with an updated enroute forecast. Well, as it turned out the wind was everywhere and many flights were calling for different altitudes in order to avoid the wind. After another hour or so the crew were advised by ATC that they were not permitted to leave their flight plan altitude. As the aircraft proceeded southwest its track started to merge with many other flight tracks from the US planes heading to Honolulu. As they progressed further into the flight it was becoming obvious that the wind was not going to decrease. The
Chapter 3 ~ The Early Days ~ 45
captain and dispatch discussed the possibility of diverting to San Francisco for fuel before going on to Honolulu. But guess what? San Francisco International was zero visibility in fog and Los Angeles was not much better. All this communication took considerable time as the frequencies were very busy and the aircraft was now well into the flight. It was becoming evident that the flight would not make the Hawaiian Islands and was fast approaching point of no return. It was now about 4 hours into the flight and the aircraft had only covered about 840 nautical miles as opposed to the flight plan of 1600 nm. The average headwind had been approx 260k. The crew requested a return to Vancouver and Air Traffic Control took a while to give them clearance so that by the time they were able to turn the aircraft around towards the mainland, it was about 4.5 hours out and approx 990 nms. from Vancouver. After they turned around the wind was in their favour, and pushed the aircraft’s ground speed to 740k. It took one hour and 18 minutes to get back to Vancouver, not including descent and approach which add a little time. The real kink in this story was the finale: as the aircraft approached Vancouver it was over its maximum landing weight. The return flight was so quick that the plane still had not burned its planned enroute fuel and was required to dump fuel on descent in order to accomplish max landing weight - somewhat bizarre to say the least! After landing a new crew was waiting to restart the trip at a flight plan altitude of 24,000 ft., which was about the same as the altitudes flown by DC 6
46 ~ Captain Ken Kaplan
prop planes in the old day. To my knowledge this was the only oceanic flight in C.P. Air’s history that did not reach its destination and arrived on land safely. Joss did not work against us this time! In later years Captain Ken Kaplan became a very good friend and he would pilot the inaugural flight to Thailand for us in 1987. These days, however, Captain Kaplan is frequently the sender of email jokes, cartoons, aviation news stories and other communiqués to his old network of friends and this speaks volumes about the tight family that continues to flourish so many years afterwards.
Chapter 4 ~ Becoming “CP Air” and expansion fever
In the spring of 1969 those of us who kept an ear to the ground detected lots of excitement in the executive offices. The company recorded a healthy operating profit of $11.7 million on revenues of $133.7 million, which was a whopping operating margin of 8.7%, a feat seldom achieved by airlines. After paying interest to the parent company and income taxes, $3.5 million net profit remained and the company had 5,012 personnel. The passenger load factor was a very modest 50% which meant there was lots of headroom for growth in ridership and profitability. There was talk of liberalization of air routes. Goodness! The Canadian government (which was often referred to simply as “Ottawa” by CP Air people) was going to allow Canadian Pacific Airlines one flight a day across the continent to Toronto! But in order to get that privilege we were told that we would have to give up some of our provincial flights
48 ~ Ian Sinclair, the Chairman of CP Limited
and hand over those routes to Pacific Western Airlines (PWA). It just wouldn’t do for “Ottawa” to let us have our cake and eat it as well, so they had to take something away from us, in this case a profitable segment of our short haul routes within British Columbia. I was assigned the task of compiling a list of fixed assets of the airport operations that were slated for sale to P.W.A. We kept Prince George, Terrace, Prince Rupert, and Kelowna while giving up Cranbrook, Nelson, Castlegar and several other destinations. As Joss [1] would have it, eighteen years later, I would perform the same task of handing over the assets of CP Air to PWA when they acquired us lock, stock and barrel in 1987. Handing things over to PWA seems to have been my lot. 1969 was a time of great excitement. We were preparing to take delivery of Boeing 737’s and placing orders for Boeing 727’s – the aviation marvels of the time. I can remember the brass telling us that the B 727 was the “whispering jet” because with their three engines at the tail section, you would hardly hear engine noise while in flight! Imagine, three engines pushing 120 seats through the air, but then oil prices were below $3 a barrel back then. I was involved in all aspects of aircraft accounting including setting up capital budgets that had to be submitted to the airline’s board of directors, among whom were the likes of Peter Bentley of Canfor Fame, Thomas Bata of Bata Shoes, and of course, the irrepressible and larger than life legend, Ian Sinclair, the Chairman of
Chapter 4 ~ Becoming CP Air ~ 49
CP Limited. We were undergoing a corporate image makeover as our company name was changed from Canadian Pacific Airlines to CP Air. This was part of the rebranding of the parent company, Canadian Pacific Limited. The parent company, whose roots were Canadian Pacific Railway (CPR), had become a holding company with a diversified portfolio of companies including operations in trucking, telecommunications, shipping, hotels, airlines, railways and even mail. Canadian Pacific was a Canadian powerhouse, a conglomerate that had global reach and domestic might. It loomed large in Canada and played a leading role in how the Canadian government dealt with CP Air in the growing years of the two airlines, Trans Canada Airlines (Air Canada) and Canadian Pacific Airlines (CP Air). So entrenched was the perception in Canada that Canadian Pacific was all powerful and almost “sovereign-like” that all constituent companies under the umbrella CP Limited were allowed to self insure themselves under provincial worker’s compensation legislation. They got the same treatment afforded to Air Canada and CN Rail which were owned by the crown! CP Air was to be our new name and our designated color scheme in the corporate speed-mark-logo hierarchy was red, orange and white. So, gradually our aircraft were all painted orange and red and thus began
50 ~ Bill Genereux
the era without the Canadian goose symbol on the tail. This era that would last almost 30 years through multiple mergers and ownership changes and only end in 1999 when once again a much bolder, stylized Canadian Goose design was introduced for the last time, just before the airline finally succumbed to its fate and was merged with Air Canada. Joss [1]. In late 1968 the new Vancouver airport terminal opened to the north of runway 8 and the old south terminal buildings which consisted of a number of wooden shacks. At that time the new airport was a grand gateway to Canada. Its imposing curved driveway with underground parking and the twin turret-like winglets (so fortress like!) gave Vancouver its first glimpse of its future as an international gateway. Of course this meant that CP Air was also going to have to build new facilities to accommodate its own growth plans. A brand spanking new CP Air Operations Centre was built to the north of the new highway (Grant McConnachie Way) leading to the new Vancouver airport in 1970. It made a massive footprint in terms of acreage occupied, with three hangar bays large enough to house three DC8 aircraft and high and deep enough to accommodate the new Boeing 747’s. It housed all of the airline’s operations including the office of the President (in those days CEO was not a tag-on to the title). Its dark brown brick façade was the same as that used at the new airport, giving the impression that the
Chapter 4 ~ Becoming CP Air ~ 51
airport and the operations centre were extensions of each other. The only blemish in the brand new operations centre was that it had no windows. This would later prove to be symptomatic of a much larger problem: the cultural dysfunction of the airline. The only side of the building that had windows was the west facing staff canteen on the third floor, a large dining area that had floor to ceiling windows spanning its entire width and looked out towards the new airport terminal. Staff used to jostle at lunch time for the window seats so they could look out and check the weather and see the sky. Being curious I asked Bill Genereux, Director of Properties and Facilities of the airline, why there were no windows in a three story building. He told me that the building design was based on the model used by Northwest Airlines headquarters in Minneapolis. I thought that was odd and probed for the rationale for “windowless.” I finally was told that there were two reasons: the first was to conserve energy in the cold Minneapolis winters and the second was to prevent employees from looking out the windows thereby improving productivity. I was dumbfounded when I heard that. It was no surprise that CP Air emulated the Northwest Airline’s strategy because for three consecutive years (1968, 1969 and 1970) Northwest Airlines had led the US airline industry in net profits. They must have been doing something right! However another Northwest characteristic was the dismal relationship between management and unions and that perhaps more than anything presaged a parallel development at CP Air. In any
52 ~ Wolf Wiedemann
event, expansion took hold at CP Air as Boeing 737 and 727 aircraft were delivered in their brand new orange paint with the CP Air speed mark on their tails. The first of three wide-body Boeing 747-200 aircraft arrived in November 1973 with two more by the end of 1975. I thought those planes must be gold-plated because when I put together the capital budget for them they were $27 million apiece and that was excluding spare engines, pod kits, rotable spares and ground handling equipment!
Chapter 5 ~ The strike of 1973 and poor financial results for a few years
By 1970 I had taken on ever larger assignments from senior management and became the principle drafter of business cases to support capital spending projects. A very important principle of Board documentation was promoted by the Board of the day. They specified that business cases could not be more than two pages in length and had to be self-contained and with cost and benefit analysis that could be post audited after the fact. This was not foreign to me as my training at Peat Marwick had established these principles in my work discipline. As I began to perform more and more duties that brought me into contact with senior executives, Wolf Wiedemann, Director of Corporate
54 ~ IAMAW
Accounting, reached into the most junior rank of the accounting department and promoted me to be senior clerk of corporate accounting! Art Dodd was moved to Cost Accounting. Wolf was a very interesting guy whose habit of wandering around the accounting department with either a big grin or a big frown always made you feel that he had something else on his mind when he was talking to you. But in every respect Wolf was the genuine article when it came to knowledge of the airline industry and especially the economic and costing side of the business. Of course his decision to promote me out of seniority caused displeasure among the union ranks and for a time I was blacklisted by the brotherhood of railway and airline clerks (BRAC) and my colleagues were instructed, unsuccessfully for the most part, not to talk to me. A few years passed and BRAC lost a jurisdiction battle to the Machinist Union which then became the certifying agent for accounting clerks. By 1973 I was in my final year of accounting studies. Unfortunately, this was the year that the Machinist Union (International Association of Machinists and Airline Workers - IAMAW) struck the company in July. I had to make a choice – to continue working by crossing the picket line and take the consequences or to join my striking colleagues on the picket line. I chose to work simply because I came from a Hong Kong background where strikes were almost unheard of. The strike was a very bitter one because in its second day, Ed Hill, an accounting clerk
Chapter 5 ~ The Strike of 1973 ~ 55
who was on picket line duty, was run over by a vehicle crossing the picket line and died thirteen days later from his injuries. I remember thinking that this country called Canada and the company CP Air and its unions had to find better ways to deal with labour issues than resorting to the disturbing and violent spectacles that were frequently seen outside the main gates of many other large corporations in Canada. In August 1973 the country was almost brought to a standstill by a national rail strike that required government intervention. The origins of the CP Air strike were obscure because we had heard in May that an agreement with the IAMAW had been reached, only for it to fall apart weeks later. I was never able to verify what caused the deal to fall apart but rumour had it that the parent company had refused to ratify the agreement’s wage increase of 19.6% because it was higher than Canadian Pacific Limited’s corporate guidelines. The consumer price index growth for the year 1973 was over 14%, having run up from only 2% in 1971. This was a shocking time for the world and Canada was not sheltered from its effects despite its position as a resource rich nation that had yet to suffer the ravages of the Trudeau years on its treasury. When I arrived in Canada in 1968 I think Canada was the only developed country in the world that did not have a national debt. Who would have thought that by January of 1995 The Wall Street Journal would publish an editorial entitled “Bankrupt Canada?” that referred to
56 ~ Effect of the oil embargo
Canada as “an honorary member of the third world in the unmanageability of its debt problem.” This would happen at the least opportune time for the company as things turned out! When the strike was finally over and people came back to work in the fall of 1973, the company set about mending fences with its unions and employees in time for the arrival of the brand new Boeing 747. I had the distinct feeling then that this was not an auspicious way to launch a new aircraft. In fact, I somehow felt that the company had lost its innocence and had sown the seeds of discontent for a long time to come. Another even more inauspicious event that happened at that time was the Middle east oil embargo that the Arab oil-producing countries implemented in response to the US involvement in resupplying Israel during the Yom Kippur war. The industrialized world’s first oil shock hit on October 16, 1973 just before the first Boeing 747 was put into service. At the beginning of the OPEC Oil embargo and price action the price for a barrel of oil was US $3.12. By January 1974 it had increased to US $11.65 a barrel. Those new airplanes needed plenty of fuel to get around – they had maximum capacity of 52,410 US gallons of jet fuel. The impact of the OPEC oil embargo was instant and dramatic as the fuel cost alone of flying that new 400 seat airplane from Vancouver to Tokyo climbed from $6,500 over $20,000. This meant that in order to
Chapter 5 ~ The Strike of 1973 ~ 57
recover the cost increase the company would have to raise ticket prices by $35 each way for a Vancouver to Tokyo flight and this was assuming full loads. Assuming a 70% year round load factor prices would have to be raised to $48 each way. Joss (1) once again played a part in the destiny of the airline! The oil shock induced a severe economic downturn that was stagflationary: prices went up but economic activity declined meaning that people were not travelling and the cost of everything rose sharply as the world recalibrated itself to the new reality of higher cost oil. This resulted in a drop of more than 50% in CP Air’s profitability from 1972 to 1974 and the company would break a string of six years of profitability by recording a net loss of $6.4 million in 1975. Our operating margin had slipped from the healthy 8.7 percent in 1969 to 0.8 percent in 1975. Because of the tremendous growing appetite for air travel in the late 60’s and early 70’s, future aircraft deliveries necessitated the placement of orders years in advance. It was often the case that airlines would project profitability growth in straight lines (upward sloping of course) when ordering aircraft, helped along in no small way by the econometric models that Boeing and McDonnell Douglas would offer their prospective clients to assist in support of aircraft purchase business cases. CP Air’s experience with the arrival of the B747’s at a
58 ~ Effect of the oil embargo
time of deep recession in 1973/1974 was to repeat itself with unusual monotony in its later years. By the end of 1973 CP Air’s revenues had risen 39% over those of 1969 but its operating income had declined 7% to $10.9 million. Net income after interest on debt and income taxes was $4.2 million compared with $3.5 million in 1969. The decline in operating income was actually much greater because the airline benefited from an accounting change that reduced depreciation by $4.4 million (achieved by “extending” the useful lives of the DC8 fleet by two to three years as a result of refurbishing their interiors). Net income for 1973 would have been $2 million had it not been for the accounting change. The accounting change effectively “snowplowed” costs into the future. Passenger load factor had risen to 62% from the very modest 50% load factor in 1969 which indicated that the anticipated growth in passenger traffic was not profit-accretive as expenses ran ahead of revenue growth. The situation worsened in 1974 with the full year impact of the addition of new B747 aircraft beginning in late 1973. The company’s traffic grew by 35.4% (measured in revenue passenger miles), but in the process had to fly 38.1% more seat miles to achieve the increase, thus reducing the overall load factor or seat occupancy rate. Yield, expressed as the average fare collected per paying passenger seat mile, rose,
Chapter 5 ~ The Strike of 1973 ~ 59
however, 14% from 5.28 cents per revenue passenger mile in 1973 to 6.04 cents in 1974 as fares rose to compensate for a price-related spike in operating costs. The size of the B747 aircraft was supposed to give scale benefits to the company’s bottom line but on balance it did not. The introduction of the high capacity B747 aircraft in a period of worldwide recession handicapped the airline’s revenues as the seat load factor declined to 61.4% from 62.7% in 1973 and 63.5% in 1972. But the cost of ownership in terms of increased depreciation and interest costs, let alone an almost 40% increase in headcount to 7,680 at the end of 1974 (compared to 5,748 at the end of 1972) resulted in tremendous stress on the company. 1974’s operating income rose $3 million to $13.9 million but after deducting $6.4 million higher interest on new aircraft, pretax income actually slipped $3.4 million, leading to a net income decline of 42% compared to 1973.
60 ~ Financial Summaries
CP Air’s financial summary 1971 to 1975: 1971
1972
1973
1974
1975
Operating revenues
157.9 172.9 185.9 276.8 331.8
Operating expenses
148.6 160.2 175.0 262.9 329.0
Operating income
9.3
12.7
10.9
13.9
2.8
Net income
2.1
5.2
4.2
2.4
-6.4
RPM’s
2410.1 2751.5 2890.9 3913.0 4251.1
ASM’s
4413.7 4331.7 4612.1 6369.5 7168.9
Load factor
54.6% 63.5% 62.7% 61.4% 59.3%
Yield per RPM
5.4
5.2
5.3
6.0
6.7
Op revenue per ASM 3.6
4.0
4.0
4.3
4.6
Op expense per ASM 3.4
3.7
3.8
4.1
4.6
Effect of the oil embargo and the oil shock of 1973-1974 (price of oil)
1971
1972
1973
1974
1975
RTM’s
323.0
353.0 372.2 488.9 538
ATM’s
634.6
619.2 679.1 919.9 1012.5
overall load factor
50.9% 57.0% 54.8% 53.1% 53.1%
Employees
5364
5748
6439
7680
7541
Chapter 5 ~ The Strike of 1973 ~ 61
1975 was even worse: the airline recorded its first net loss in more than ten years. Revenue passenger miles increased 8.6% while total seat miles flown were up 12.6% and load factor dropped to 59.3%, It seems that Joss (1) was never going to be on our side. While revenues rose 110% from 1971 to 1975, operating expenses were up 121%. The operating profit margin of 7.3% in 1972 was squeezed down to 0.8% in 1975 and after paying the interest on debt, 1975 turned into a loss. In the meantime, we had added 2,177 more employees, an increase of 40% over 1971!
62~ Braniff, Peoples Express and Laker Airlines
Chapter 6 ~ Orange is beautiful but only in the land of cherry blossoms and Watson Lake!
CP Air’s big colorful Orange jets were de rigueur in those days and matched the likes of Braniff, Peoples Express and Laker airplanes. The vibrant orange color with the distinctive red and white motion mark on the tail was designed to evoke a sense of excitement and adventure that appealed to holiday makers. Sadly, it turned out that those colors were not attractive to business passengers and although it has never been officially published, CP Air’s passenger composition was always more weighted towards vacation and lower fare-paying customers than it would have liked. I remember that later in my career the discussion came up in many Executive Committee meetings regarding the fact that more often than not CP Air’s yield (revenue per passenger mile) was 15% to 20% lower than that of its competitor, Air Canada. It was a complex issue that had its roots in the route network and flight frequency advantage that Air Canada had over CP Air. Canadian corporate geography, heavily centered in Toronto and Montreal, combined with the
64 ~ Kaz Sato
unending pilgrimages of corporate Canada to Ottawa (where the nation’s capital presided over large policy decisions affecting those corporations) had spawned an unassailable fortress built by Air Canada and Air Canada’s grip on the business traveler was beyond the resource capacity of CP Air to overcome. The orange jets, however, were a big hit with one particular customer segment – the Japanese! CP Air’s orange jets were almost revered in Japan, the land of cherry blossoms. This was before Japan’s coming of age and her citizens had not yet begun to span the globe in a travel frenzy that defied belief in the 1980’s. CP Air’s orange and red airplane was a much more effective symbol of Canada than any media advertisement that would have cost much more. CP Air developed a thriving business from Japan. Planes full of Japanese flying to Canada to visit such fabled destinations as Banff and Lake Louise, Niagara Falls and later even to the house of Ann of Green Gables in Prince Edward Island. True to its entrepreneurial style, CP Air created a subsidiary company that arranged and provided all the ground accommodation and travel arrangements for the large groups of Japanese customers. This company, known as Trans Pacific Tours Limited or TPT, was a big hit because it was run by a Japanese General manager, Kaz Sato who knew the Japanese likes and dislikes and how to design and package deals that made
Chapter 5 ~ The Strike of 1973 ~ 65
TPT and CP Air exceptionally successful and profitable on the Japan route. More on this later. The orange jet was also a favorite of a certain First Nations tribe in Watson Lake. I recall once, as a travelling auditor, getting off the plane at that tiny northern outpost and witnessing a band of Indians camped beside the airport waiting to watch the aircraft depart on its onward journey. I asked the local station manager what this was about and he told me that the band made it their habit to come to the airport to watch the orange bird.
66 ~ Ian Gray
Chapter 7 ~ “The People’s Airline – better known as “Sky Bus”
I can’t remember the circumstances that led to the creation of the “Sky Bus” but I do know that it was considered a great success as a new product. Up until 1982 all our aircraft were configured in first and economy class. The load factor for first class was more often than not less than 50% whereas economy class would have full loads. At the time CP Air operated several DC8-55 aircraft that were configured to accommodate passengers and cargo on the passenger deck. This was not an optimal passenger product but President Ian Gray came up with an idea that was put to the test: use the aircraft on the Vancouver-Toronto red eye run at midnight and discount the passenger fares as a branded product called “Sky Bus” that did not require advance booking. In other words cheap travel was accessible to people who turned up at the gate as long as there was a seat available. He felt it would appeal to the more
68 ~ Freddie Laker
economy -minded travelers such as students, backpackers, VFR (Vancouver frequent) travelers and he was right. Those red eye “sky buses” ran full and were extremely popular. Ian Gray felt that air transportation should be more accessible to the common people of Canada through the creation of branded products such as “Sky Bus”. Little did Ian Gray know that he had pioneered the beginnings of the new fad of low cost no frills airlines that would be made popular by the likes of Braniff, Peoples’ Express and Freddie’s Laker airways. Today, some of the most successful airlines in the world, Southwest airlines and WestJet, are prime examples of how a low cost no frills model can work well as long as the employees support the ideals of productivity combined with ownership. But being an airline that lacked a coherent marketing strategy except for the one that dogged its entire life – (to fill its seats for whatever it could get), CP Air began to confuse its customer base by introducing the Sky Bus product on all its flights. It was almost painful to watch the gyrations that the company went through to install moveable curtains in every airplane to segregate those discounted Sky Bus customers from the economy class customers and the first class customers. It was an operational and payload control nightmare. The lesson I and a few of my finance division colleagues learned from this was that marketing people are to be watched warily since they have a tendency to latch on to a
Chapter 7 ~ The People’s Airline ~ 69
successful product and attempt to flog it to death rather than to deploy it strategically and profitably. I personally believe that the success of these discounted airfares without advance purchase rules was frowned upon by the regulation-happy folks at the Canadian Transportation Commission (CTC) whose interest it was to see that Air Canada’s fares were not affected by something quite so brazen as cheap seats without advance booking. Imagine, this was in the early 1980’s, a time of rampant inflation, recessions all over the world, sky high interest rates, wage and price controls etc., and what have we here? An airline that wants to sell seats cheap! That would not do, and so when CP Air filed tariffs with the regulators to increase fares it normally met with road blocks citing Sky Bus as being detrimental to yield. Ian Gray was also impatient to make the company profitable and he looked under every rock to turn idle assets into cash and profit. One famous example of this was his direction to sell our company house in Tokyo that had been bought shortly after the war in 1949 when Canadian Pacific Airlines was the fourth western airline to commence air services to Japan (after Northwest Airlines in 1946, Pan Am in 1947 and British Airways or BOAC in 1948). The company house in Tokyo was located in Jyugaoka, Tokyo, on land that measured 700 tsubo or 2,310 square
70 ~ Sammy Fattedad
meters. The former owner was a baron and the house was refurbished to accommodate flight crew. (In those early days there were very few available hotels in Tokyo). In-flight meals were prepared in that house and were transported to the aircraft by the company vehicle. Within this property the company built a house for the General Manager. Ed Ogden (who later returned to Vancouver to become VP Marketing) lived there. So did Bill Slean and after him John Pastuszynsky. John was later reassigned to be Regional Manager Europe based in London and left CP Air after one of the merger re-orgs. He joined Fairmont Hotels. The Staff House (crew and kitchen facility) was closed some time later when the company decided to demolish it. The Director of Properties and Facilities was Hal Suddes and he had the giant stone lanterns from the property shipped back to Vancouver to be placed at the entrance to the newly opened Operations Center. Those beautiful stone lanterns can still be seen at the main entrance to the now defunct Operations Center at 1 Grant McConachie Way. The company house had a book value of something like $500 but was worth over $20 million, the equivalent of a Boeing 747 jet at the time. The transaction went ahead in 1976/77, but it would be several years later before we would see all the money in Canada because red tape and Japanese tax consequences made their mark. Eventually we received most of the proceeds but only because we made some substantial
Chapter 7 ~ The People’s Airline ~ 71
reinvestments in Japan, including an apartment for the company General Manager. The replacement apartment, bought for $1 million at the time, still serves as the residence in Tokyo for Air Canada’s General Manager. This may have looked like a great profit-taking move for the company at the time but in hindsight the rise of Japan in the 1980’s meant that if we had hung on to the house and sold it in 1990 it would have fetched almost $60 million. In the late 1980’s it was well known that the value of real estate in Japan was higher than all the real estate value in the United States and some people said that the Canadian Embassy compound was worth the equivalent of Canada’s national debt. Once again Joss [1]. Ian Gray took a particular liking to the two Fattedads in CP Air. The other Fattedad was Sammy, my brother, who had joined the airline after coming to Canada in 1972. He worked for Wolf Wiedemann in the financial analysis department and was soon known to be a quick learner and a fun guy to have around. Ian Gray had met Sammy on the ferry once or twice going over to Vancouver Island for weekends and he told me that he liked Sammy’s guitar playing. Apparently Sammy used to serenade the ferry passengers during the crossing. Being in the
72 ~ Jimmy “the Greek” Melidones
financial analysis group Sammy got lots of exposure to senior management and got invloved in fleet planning, IATA costing and the Anti-Inflation Board (AIB) filings. When Ian Gray decided to establish a company task force to examine every department’s operations and budgets, Sammy was a natural to be named to the task force. This was a heady time for him as he roamed around the company’s halls with his taskforce buddies, taking names so to speak. Later Sammy would join Brent Statton’s Fleet Planning and Scheduling department as a director of scheduling. Brent Statton, Ken Dakin, Sammy and I used to go salmon fishing and stay over at Ken’s cabin in Nanaimo on weekends. Unfortunately Sammy’s stint in the taskforce had made him some enemies in the company and that would come back to haunt him when Dan Colussy arrived and politics became even more rampant in CP Air. Sammy would leave the company in September 1985. But in his inimitable style Sammy has led a fulsome life since then with many adventures, including stints as an actor. He maintains friendships that we both share and he is fondly remembered by people from his CP Air days.
Chapter 8 ~ Norfolk Broads – how I came to be nicknamed “Kato”
Social life in the aviation world in the 1980’s was rather basic – work all week and socialize at the many pubs that airline employees frequented on Friday evenings. One of the pubs that I frequented was the Pump House on Blundell Road in Richmond. It was a microcosm of all the disciplines within the airline industry – from airport operations to marketing to sales and reservations. There was a particularly tightknit group of individuals who were known as the “Boat Crew.” They sometimes wore numbered baseball caps with the insignia “A buza usque a buza” emblazoned on the fronts of their caps. The leaders of the Boat Crew were Harry Voth (#2), Director of Customer Service, and Peter Allchin (#3), Director, Vancouver Airport. Other members of the Board Crew included Jimmy “the Greek” Melidones, an airport agent; Paul Sutherland, an airport manager; Jim Taylor “JT”, a ramp attendant and many more….
74 ~ Peter Allchin
This group was well known for their stories of pub crawls in convoys of river boats on the canals of the Norfolk Broads in England. One night at the Pump House pub I overheard the Boat Crew talking about a “mission” and asked how one got invited to go on such a mission. I don’t recall exactly how it happened but I found myself on an airplane to London with the Boat Crew and was initiated into the group wearing number 30 on my own baseball cap. The insignia on the cap I later discovered meant “From one drink to another”. My first trip on the Boat Cruises was in 1981 and I acquired the nickname “Kato” on that trip. A group of us were sharing a hotel room in Norwich, England and during the night I woke up having to relieve myself of the multiple pints of Green King Abbott pale ale and was gingerly maneuvering around the room taking care not to wake up the others when Harry Voth grunted out “Not Now, Kato” conjuring up the Green Hornet radio program. I became known as Kato from then on. Some of the characters in this group were larger than life – Peter Allchin aka. “Choco” was a six foot two bruiser from Blackpool who sported a Clark Gable mustache and ran Vancouver Airport operations for CP Air. Choco was also the fleet’s “admiral” since he had swallowed the largest number of goldfish and probably drank more pints than any of the crew. Another giant among the group was Mike Dukelow, the six foot two cherub-faced Communications manager for CP Air whose
Chapter 8 ~ Norfolk Broads ~ 75
bemused smile almost always disarmed reporters looking for a story on the airline. Fortunately these were the Airline’s heydays and there were few worries. Harry Voth was my favorite as we could see eye-to-eye, he being five foot ten. Harry had a resemblance to Kenny Rogers before Roger’s face lift and was Director of Customer Services. Another well known personality was Jimmy “the Greek” Melidones who arguably had the most important job in the airline: concierge at Vancouver airport. Jimmy knew everyone, especially every umpteen thousand mile customer of CP Air, and they all knew him! Imagine what went through my mind when Jimmy fell through a plate glass door in the Norfolk Broads and we had to rush him to a county hospital in the middle of the night to get stitched up! “My goodness, how are we going to explain how we lost Jimmy to those customers of his!” Incidentally Jimmy had married Judy Fisk, that blue eyed blond who had mesmerized all the male staff in accounting. I could only imagine what she would have said if I had brought him back to her in a casket! He survived the ordeal although not without a running battle in the emergency ward. The nurses chased him down with syringes filled with water -- he had “shot” them with his water pistol when they tried to stitch him up! Every member of the boat crew was re-acquainted with “Rule 1” on every trip to the Broads. Rule 1 meant “No business talk”. If anyone even pointed at an airplane stitching a contrail in the sky overhead he
76 ~ Jim Taylor
had to buy a round at the pub. Rounds in those days would cost upwards of $100 depending on how many “crew” came on the mission so Rule 1 was definitely not to be broken! We would pick up our river boats at the boat yard in Loddon, about ten miles southeast of Norwich and for a week we would drift around the Norfolk Broads stopping off at every pub along the waterways. Some of the most memorable places we visited were: Berney Arms, where pictures have been known to be taken of certain members of the crew sleeping curled up with sheep; Beccles and the Waveney Inn, where JT (Jim Taylor) fell into the Waveney river fully clothed and soaked his passport; Oulton Broad with its thatched public toilets; the House of the Rising Sun at Coltishall on the River Bure; the bridge at Wroxham where we attempted the sinking of an “enemy” boat passing under it by dropping a water-filled weather balloon; and finally the most memorable of all when we attempted to cross the English Channel from Great Yarmouth on D-Day (the 6th of June 1981), but failed to make headway against a nine knot incoming tide. Not surprsing: our canal boats had hull speeds of nine knots! Many annual journeys were taken by the Boat Crew and that knit us into a tight group of friends and a more cohesive team in executing our daily aviation business undertakings. It was never an issue to call
Chapter 8 ~ Norfolk Broads ~ 77
each other to say something needed to get done, approved or expedited in order for the operation to flow better and we all pitched in when called upon simply because we had spent time together on the Norfolk Broads. At the same time there was another group known as the “Conquistadores.” It was made up of CEO’s and COO’s of the world’s biggest airlines who got together annually for a weekend to bond. They met at hunting lodges, took safaris together, etc. It is not clear whether they had the same “Rule 1” as the Boat Crew did. I do know, however, that membership was limited to the top two officers of each airline. I often wonder if membership in the “Conquistadores” included the top officers of Air Canada and CP. If it did the ruinous war of attrition between the two may have been avoided.
78 ~ Philanthropy
Chapter 9 ~ A brief mention of philanthropy among our people in uniform
Not all off duty endeavors of the airline’s people were about booze cruises, hunting and having fun. Some of our people spent their offduty time trying to make a difference to the poor and underprivileged so I think the reader will bear with me if I make brief mention of some of those people. In my mind they are unsung heroes whose personal ethics and integrity not only showed in their service to our customers but also in their private lives towards those in need. I dedicate this chapter to all those people in CP Air and all the constituent airlines with apologies to the many whose names should be mentioned but aren’t, either because I have not heard of them or because a chapter can only be so long.
80 ~ Adrianne Damgaard
The Lima Project Adrianne Damgaard, a flight attendant who joined CP Air in 1967 and retired in 1998, was based for roughly eight years in Lima, Peru. There she met a Catholic priest, Father Henry, who was working in the Lima slums. She expressed an interest in helping in some way and Father Henry took her around to several different projects that he felt needed help. Adrianne met a Spanish lady named Clara Monreal who lived in Lima and was working all on her own with no volunteers or support from anyone. Clara had started a small school in the barrios for children in the 45 year age group. These kids were very poor but they were not orphans. They did have at least one parent and the parents in most cases worked to try and make a living. Adrianne and the Lima-based crew helped out in their off duty time, taking the kids for trips to the zoo or beach and generally providing adult care and attention. They negotiated with and brow-beat local merchants into providing food for lunches and they developed a wide network in Canada through which their colleagues donated clothing for the children as well as their parents. The company was generous in airfreighting free of charge the donated clothing down from Vancouver. Every year for a decade Adrianne put on Christmas parties for the children with Santa making an appearance. Hotdogs, cake and presents were provided for all the children. Hilda and Captain Bob Randall Sr. would fly down almost every year for the Christmas party and
Chapter 9 ~ A Mention Of Philanthropy ~ 81
were a great help. Myra Bowen, another flight attendant, was also very involved in this project. Among the achievements accomplished in the Lima project was a young child who was severely cross-eyed and would have been disabled for life without surgical treatment. Adrianne and the team in Lima were able to “persuade” a local specialist eye surgeon to do the surgical procedure without charge and the child’s vision was restored. Sadly, the school that the Spanish lady, Clara, started was shut down after death threats and sabotage by Peruvian terrorists who opposed aid for the poor and Clara returned to her native Spain. The Bangladesh Project Tove Kilburn, a flight attendant who joined CP Air in the 1960’s was very instrumental in establishing and operating the Families for Children Orphanage in Bangladesh. She spent a large portion of all her free time organizing finances and logistics as well as in situ in Bangladesh. Many others…….deserve mention Folks such as Nina Morrison, affectionately known as number 1 (for her seniority in the flight attendant ranks) spent loads of time
82 ~ Dave Murphy
volunteering at the Cancer Clinic. Tony Riley, flight attendant who sent money to assist the overseas projects mentioned above and whose mother knitted clothing for the cause. I am sure there were plenty of other worthwhile and charitable undertakings made possible by the generosity of the people of the family of airlines, and my whole purpose in devoting a brief chapter to some examples of their work is to highlight the spirit of service that was a great part of the fabric of the airlines’ culture. I always wished there was a way to recognize and celebrate these un-sung heroes and I hope by the inclusion of this chapter to convey to them that to a great extent, I held their spirit close to me during the trying times that were to come later in the fight to save our airline.
Chapter 10 ~ Recollections of being head of corporate
accounting and world- wide accounting operations
In 1974, after receiving the Certified General Accountant (CGA) designation (a professional accounting qualification that CP Air financed), I was quickly promoted to a management position (Travelling Auditor) from my previous role as Senior Clerk of Corporate accounting, which was a union job. As a travelling auditor I gained a lot of insight into the company’s far-flung operations. I traveled to and audited the operations of Buenos Aires, Santiago, Peru, Mexico, Whitehorse, Watson Lake, Fort St. John, Fort Nelson and San Francisco. I even travelled to places like Singapore where my boss, Dave Murphy, sent me (ostensibly to audit a problem office but nefariously to have my hair cut by the authorities in Singapore who at the time refused entry to anyone with hair covering the shirt collar!) In 1977 I was appointed Manager of Corporate Accounting by Jack Crawford who had taken over as Comptroller. Shortly after that, in 1978 I assumed the position of Director of Corporate accounting. Aside from responsibility for the production of the
84 ~ Henry Bretischer
company’s financial statements and maintaining its capital budgeting system, the job included responsibility for overseeing all of CP Air’s overseas accounting offices and more than a dozen accountants reported to me in Vancouver. Yet again Joss [1] played its card by completing a circle that had begun ten years earlier when I was a junior clerk processing sales reports from those very offices. There were many interesting and diverse learning experiences for me during this time. Among the many memorable things were: Negotiating the first tax leveraged lease in Canada I was very curious about the aircraft “lease” arrangement we had with CP Limited and began to research how “head office” calculated the lease interest rate. They used their marginal cost of borrowing plus ¼ to ½ percent to calculate interest and then charged a straight line amortization of the cost of the equipment over its estimated useful life. In the final year of my CGA studies, I had learned about the after tax present value of depreciable assets and since aircraft at that time had very generous initial year depreciation allowances for tax purposes (I recall it was close to 40% on a declining balance basis), I calculated that there was substantial tax sheltered cash flow benefits to CP Limited from the ownership of those aircraft. I approached Henry Bretischer at CP
Chapter 10 ~ Head of Corporate Accounting ~ 85
Limited and asked for a recalculation of the lease rate so that CP Air would share half the capital cost allowance benefit. The result turned out to be quite significant for CP Air – the ultimate lease rate was actually below CP Limited’s marginal cost of borrowing which meant millions in savings for CP Air, and to the credit of CP Limited who accepted this lower charge as being an unofficial recapitalization of the airline. CP Air was always chronically undercapitalized. I took pains to point this out to anyone who would listen within CP Limited, but “head office” felt that capital was better managed and allocated by the parent company instead of being put into the hands of subsidiaries. I never said it in so many words but I thought that was not saying a lot for the Board of directors of CP Air! The diversity and resilience of accountants at overseas bases and lessons on building trust: Over the years I met many marvelously dedicated people at the airline. Among them the overseas base accountants were among the most colorful and dedicated in their resilience and ability to deal with a hybrid reporting structure. The organization was designed in such a way that the potential for conflict existed between the General Manager of the base and the base accountant. In order to maintain independent financial and accounting control over local base operations base
86 ~ Ken Dakin
accountants reported functionally to me in head office but for administrative purposes they reported to the General Manager of the base. This worked better in some countries than others depending on the relationship and level of trust between myself, the accountants and their GM’s. My job was made interesting by having to deal with many different characters, varying ethnicities and temperaments and having to try and make peace without compromising the integrity and independence of the finance function. I believe that because of my efforts to build trust with integrity the GM’s accepted me as a resource in head office that they could reach out to. As a result I was often invited to their regional meetings. One of the most memorable meetings I attended took place in Taormina, Italy where the European GM’s held their marketing planning meeting on November 7 and 8 of 1979. Taking advantage of the opportunity of being in Europe, I went a few days early and used the time to convene a small regional accountants’ meeting in Rome with staff from Frankfurt, Athens, Israel, and Rome to get their input and prepare myself for the marketing director’s meeting. This was useful because they warned me that their marketing counterparts were going to argue that they should have more control over base accounting activities. I spent a very pleasant time in Rome with the staff who were kind enough to show me the sights and sounds of that most venerable of cities. Our tour included the Spanish Steps, Trevi Fountain, St. Peter’s,
Chapter 10 ~ Head of Corporate Accounting ~ 87
and the Colosseum. I admit, however, that I was less than impressed by my accommodation in Rome. The local base accountant booked me into a three star establishment where the shower was located directly over the toilet and wash basin –meaning that when one took a shower, everything in the bathroom would be soaked! Mr. Fusco, our accountant, would remind me that being in the finance side of the airline meant we didn’t get to stay at the Rome Hilton! I did not want to know where the European GM’s were staying! I was unprepared for the short flight from Rome to Sicily. As we descended from cruise altitude our aircraft was buffeted by the mighty seasonal sirocco winds on the approach to Catania airport. I felt sure the plane was going to be upended on the final approach but we landed safely. Situated at the southern tip of Sicily, Taormina is a wonderfully quaint town that clings to the cliffs overlooking the Mediterranean and across to North Africa. Attending this meeting was the Executive Vice President of the company, Ken Dakin, and his presence at these meetings was always regarded with some trepidation by everyone. Ken had a knack of piercing you with soft blue eyes that peered out from under a pair of thick, bushy eyebrows, one of which had an upward sweep which gave the impression that he was always asking a question. On the night before the meeting and over a pre-meeting dinner at a restaurant in the town square, John Pastuszynski, the regional Director for Europe
88 ~ Bill Farrall
at the time and the convener of the meeting in Sicily, told me that Ken was not a fan of the dual reporting relationship for base accountants and that he might raise the issue at the meeting the following morning. I should consider myself forewarned. As mentioned earlier, I was alerted by my people in Rome that this was a local management issue so I was pretty much prepared for John’s approach, which was to use Ken Dakin as the hammer to buttress their agenda. It was close to midnight and I looked over to Ken and winked at him with a nod towards the exit at which point he winked back and we excused ourselves and proceeded to his room to “chat” about things. We polished off the larger part of a bottle of Glenfiddich in the ensuing three hours and I remember having only a couple of hours’ sleep before waking up to go to the meeting at 8:30 a.m. Ken turned up on time and was fresh as a daisy while my eyes were bloodshot and I was sorry I had come. He did not mention base accountants at all that day or ever in his time at CP Air. He was a corporate guy who understood the meaning of checks and balances. Another lesson on building trust and relationship happened early in my time as the Director of Corporate Accounting. I passed by a bulletin board located in the accounting department and saw that the IAM (machinists union) representing our accounting clerks had posted some inflammatory rhetoric on the board and I instructed the office manager to have the notice removed. This did not come off well with Bill Farrall,
Chapter 10 ~ Head of Corporate Accounting ~ 89
one of the senior stewards of the machinists union. He came up from the aircraft hangar and into my office as angry as all get out to say that I had no right to remove anything from the bulletin boards as they were union property. I was taken aback by his bravado and said “There’s no such thing as union property in here, pal.” To which he replied “Take another look at the collective agreement sonny boy”. I was surprised by this and was caught off guard so I said I would take a look at the agreement and if he was right, I would rectify the situation and have the posters put back on the bulletin boards. I guess he never expected that sort of reply from me and said he would be back in 24 hours. He never came back as I confirmed the truth of his assertion and did as I promised. The posters reaffixed. Bill Farrall went on to become the President of the IAM in Vancouver and the strategist behind many ingenious conflicts with the company. He would eventually be one of my biggest allies in the fight to save Canadian Airlines several decades later. One of the stories he liked to tell his other union friends was the story of the bulletin board and how he came to know that I was a man of my word. The following are some vignettes about our overseas base accounting offices and accounting managers:
90 ~ Harry Hargadon
The London UK challenge – London was a perennial problem base for the airline as one accountant after another either quit or was replaced for failing to reconcile base accounts. In keeping with the dual reporting relationship practice, Harry Hargadon, the General Manager of London, invited me to interview a fellow by the name of Ian Glass to replace a departed accountant. We discussed our impressions of the fellow and agreed he would be a good candidate. Less than a year later he embezzled the petty cash fund along with his local church charity and he was sent to jail. I had to go to London for his trial to testify that I did not authorize his use of the petty cash fund for his groceries! London was a funny place. All sorts of loose accounting practices were carried out there, including one incident involving the famous low cost carrier pioneer known as Peoples’ Express. When I went to London to investigate why we held a large sum of money in the name of that airline, the explanation I got baffles me to this day: our Charter operations (CP Air Holidays) based in Gatwick handled Peoples’ Express flights and the airline would allow CP Air staff to sell tickets to and collect cash from UK residents wanting to go to the United States. Peoples Express had no staff in the UK and paid CP Air to handle its flights at Gatwick. They kept no records themselves and they had no idea of what CP Air held in cash for them. I am not exaggerating, but the figure was upwards of $100,000. We notified Peoples’ Express in Newark several times but they never claimed the money and I seem to remember we wrote it off
Chapter 10 ~ Head of Corporate Accounting ~ 91
to income when CP Air Holidays wound down its large operating base at Gatwick following its own curtailment due to unprofitable results. The Tokyo icon – Hiroshi Yoshida was a long term employee and accountant of the Tokyo establishment. He prided himself on being a graduate of the University of Tokyo and I think he believed that its rightful name should have been Imperial University which was its name until 1947. Mr. Yoshida ran a tight ship, was never late in reporting and he was intransigent in applying company policy. Once, in my early days as an accounting clerk, I was “off-loaded” in transit from Hong Kong to Vancouver. The plane was full and I had to spend the night in Tokyo. In the morning I thought I would wander over to the CP Air office in Tokyo to introduce myself and obtain a cash advance as I was short of cash. Mr. Yoshida came to the counter and introduced himself to me and also to advise me that there was no provision in corporate policy to advance cash to employees in need, especially non-Japanese employees. I wasn’t about to argue with him and left without the 1000 yen I was seeking, opting instead to borrow the money from a fellow “off loaded” employee with a promise to repay him when we arrived in Vancouver. Years later I would remind Mr. Yoshida of this incident on the occasion of his retirement when I was invited to Tokyo to make a presentation to him as his boss. In his inscrutable style he reminded me that I was a “long haired hippie” when that incident occurred and he was simply
92 ~ Nick Vrailas
using his judgement! The Hong Kong pillar – M.K. Wong was a diminutive man with a big smile and an earnest demeanor. Everyone knew him as MK and he too ran a tight ship. He was very much respected by the staff in the Hong Kong office and was able to develop a trusting and respectful relationship with every General Manager that was posted to Hong Kong, including Harry Hargadon whose appreciation for MK was almost reverential after the Ian Glass experience! My memories of MK are filled with the warmth that he extended to me and his pride in my having come from Hong Kong and rising to senior ranks in CP Air head office. MK retired from service and migrated to Toronto, Canada. The Australian redhead – I met Maree Graves for the first time in 1969 when I went to Australia to attend a wedding of a dear school friend from my days in Hong Kong. I decided to go into the CP Air office to introduce myself to the accounting people there. Maree Graves was a stunning redhead with bright freckles and green eyes that bore through you when she talked. Over the years Maree became a very dear friend to me and gained my respect with her derisive quips about the corporate policies that so obviously offended her sensitivities. I admire people who speak their minds. Maree was meticulous in her job and always completed reports and reconciliations on time. In later years she
Chapter 10 ~ Head of Corporate Accounting ~ 93
would not be shy in pointing out to me that the idea of starting up a tour company in Australia was not one of my best! More on that later. The Israeli – Joe Binder was a character who never failed to amuse me with his complaints about the shenanigans of the local GM and sales staff. The practice of bartering (perfected in middle-east bazaars) was being applied fairly regularly in the Tel Aviv office and Joe was apoplectic when his interventions were inevitably dismissed! The realities of the land seemed to evade the native. The Greek – Nick Vrailas was a Greek gentleman through and through – as bureaucratic as they come and straight as an arrow. In most emerging countries that the airline served in those days currency devaluation was a constant risk, especially when most travel agents were allowed upwards of 45 days’ float before they had to report ticket sales and deposit the money from those sales. Imagine the loss in value if currencies devalued 10% a month, which often occurred! Nick constantly fretted about this aspect of the business and in my conversations with him I learned a key principle – currency risk is not only real, but a daily concern when doing business in emerging and third world world countries.
94 ~ Fulvio Fusco
The Peruvian – Margarita Valerga was our Peruvian accountant in Lima. I visited Lima three or four times during the 70’s and was always impressed by Margarita’s cheerfulness and vitality. I never understood why it is perennially overcast and foggy in Lima but I do remember thinking that the gloomy weather was synonymous with the poverty and dire straits of the Peruvian people. I recall vividly being warned about the dangers of being mugged in Lima and I worried for the safety of our staff there. In those days, aircraft and crew scheduling for South American flights resulted in the opportunity for flight and cabin crew to be based in Lima. As a result their working income was earned outside of Peru and they were exempt from Peruvian income taxes. Also because they were domiciled in Peru they were exempt from Canadian income taxes. In later years, Margarita would emigrate to Vancouver. The Chileans – Gerald Smith and Raul Cifuentes were the accountants. In fact, Gerald Smith was my baptism of fire, so to speak, when it comes to dismissing staff. One of the first things I had to do on assuming my role as manager of overseas base accountants was to go to Santiago and dismiss Mr. Smith. He had not done anything dastardly like defrauding the company but a chronic failure to prepare and send in accounting reports to head office made it necessary to terminate him. This was the first time I ever had to dismiss an employee and I can still see his dejected eyes and drooping moustache as he said “What took
Chapter 10 ~ Head of Corporate Accounting ~ 95
you so long to do this?” Raul Cifuentes was his replacement and he turned out to be an eager young man who met his responsibilities well. Being a newcomer to the position of base accountant he was more easily swayed by local office politics when it came to maintaining his independence and I recall that on several occasions I felt it necessary to remind him of his control duties as they related to the prompt reporting of sales by local agents regardless of unofficial arrangements granted by the sales manager. The Italian – Fulvio Fusco was our Italian accountant based in Rome. He was my greatest challenge as his propensity to play office politics often got in the way of his intelligence. One thing was for sure, there was always intrigue in Rome. The Fraulein – Regina Boendgen, based in Frankfurt was a rather cherubic German lady who hid flashing eyes behind thick rimmed glasses and always had a ready smile for everyone. Her work ethic was exemplary and she was always on time with her reports. I was very grateful to her for her help in assisting Nick Vrailas in Greece whenever he needed it. The Argentine – Ron Penn was our accountant in Buenos Aires – our office from hell! Currency devaluation and runaway inflation were the
96 ~ Ron Penn
twin constants and with travel agents’ delayed sales reporting it was an office awash in large receivables that were depreciating in value to us on a daily basis, sometimes as much as 10% a day! Ron Penn was a critical set of eyes for the finance function in head office, especially in maintaining control over sales practices. The airline industry perversely worked against itself in those days in that competitive sales practices included not only paying extremely high commissions on sales but also allowing generous reporting lags of up to 60 or 90 days. It was a joke to sell tickets in local currency as it was possible to lose more than 90% through devaluation.
Chapter 11 ~ The “Kremlin” protocol
CP Limited’s headquarters was located in Windsor Station in Montreal. A Romanesque Revival style stone fortress built in 1887 at a cost of $2 million (sold in August 2009 to Cadillac Fairview for $86 million), it not only served as Montreal’s central train station but a large part of it housed the headquarters of CP Limited. The hallowed halls of the headquarters included a long section that housed the Executives of CP Limited and ran the length of the building. Their office suites were guarded by heavy mahogany wood doors spaced at least thirty feet apart along a hallway paved with expensive marble. Quaintly, in front of each of those massive office doors lay a coconut doormat. It seemed you hadn’t arrived in CP Limited without that status symbol. Windsor Station became known as the Kremlin to those of us from western Canada. The winters were so harsh! Being called to headquarters was not regarded as some kind of prize!
98 ~ Dan Colussy
During my frequent visits to the Kremlin to report on (and answer questions on) the airline’s results to the Finance division of the parent company, I became aware of the strategic thinking that was percolating among the leadership in the parent company. I became friendly with Henry Bretischer, the Director of Strategic Planning and over dinner (most of the time, pizzas in the office) on many evenings, he told me that Chairman Ian Sinclair was growing increasingly frustrated by the lack of progress in the airline’s quest for freedom to compete across Canada and with the federal government’s unfair protection of Air Canada’s international route rights and ambitions. Sinclair also was of the view that the then current executive team at the airline would not be able to execute the bold moves that were required to gain the size and capacity to compete on a footing with Air Canada. At the time Dan Colussy (the former President and COO of Pan American World Airways) had become available and Windsor Station decided to hire him in 1981 with the title of President and Chief Operating Officer serving under Ian Gray who was “promoted” to the post of Chairman and Chief Executive. Colussy had a diverse background: executive positions in engineering at General Electric, corporate planning at Northeast airlines, operations at American Airlines. He also had held the position of senior
Chapter 11 ~ The Kremlin Protocol ~ 99
Vice-President in the advertising agency Wells, Rich and Green. Colussy was given one major objective – to prepare CP Air for the coming era of deregulation in Canadian aviation. Ian Sinclair was a man of vision whose grasp of what it takes to change organizations was rooted in his own experience in shaping the conglomerate of CP Limited. He knew that the task of survival in a deregulated aviation industry would require a lean cost structure, aggressive scheduling and marketing and ruthless leadership steeped with experience in the challenges of deregulation. One of the first tasks that Colussy set about achieving was to restructure CP Air’s route network which until then was predominantly point-to-point within Canada. Colussy tasked the fleet planning and scheduling group with the project to transform Toronto and Vancouver into main hubs and he began a process of fleet rationalization and operational restructuring that lasted for several years. In 1983, the “night of the long knives,” saw a sea change at CP Air. CP Limited had had enough losses and decided to “change” things a little. Ian Gray retired as Chairman and CEO of the company and was replaced by Dan Colussy. Ken Dakin also departed without fanfare. At the same time as this leadership change, Cy O’Brien retired as CFO
100 ~ Major-General Roy Sturgess
and George Warden retired as Senior VP of Maintenance. CP Limited was taking an active interest in restructuring its airline subsidiary. I became involved in a series of major decisions and transactions that took place that year. Windsor Station (the Kremlin) also brought in a new man to run the maintenance operations. Major-General Roy Sturgess was appointed Vice President Maintenance and Operations. Sturgess had recently retired from the Canadian Air Command and was made a Commander of the Order of Military Merit by the Governor General of Canada in 1981. He arrived with those reflector aviation glasses (Ray Bans, I think) and wore white shoes. This “arrival” shocked some in a culture that was more used to people in plaid jackets and striped ties! He became better known to some of us as “Whiteshoes Sturgess” and by the staff under him as “The General”. Never in its history have people at CP Air witnessed such dramatic change both at the operational level and the top executive level. It was a good time for me because changes in the Finance Division included my being appointed Comptroller of the airline. Jack Crawford, who was the Comptroller, became VP Finance and Dave Murphy who was director of internal audit became Treasurer. Sheldon Stoilen, who had
Chapter 11 ~ The Kremlin Protocol ~ 101
been Treasurer, was handpicked by Dan Colussy to head up Eastern Provincial Airways. This company was acquired as part of CP’s plan to consolidate several disparate airlines into one big airline which could compete with Air Canada. This period saw a friendship cemented between the Finance division team of Jack Crawford, Dave Murphy, Sheldon Stoilen and me that has persisted to this day. In his new role as CEO, Colussy came in with guns blazing. He immediately set about bringing in “the American way:” executive committee meetings every Monday from 8 a.m. to 8 p.m.(and later was the norm). Colussy would never tire of talking and digging into every aspect of the airline. I admired his focus but I noticed that those grueling meetings took their toll on everyone else. I often marveled at the energy that seemed to fill the room when he convened his meetings as everyone was always on edge in anticipation of the bombardment of questions and probing that came from Colussy. In the summer of 1983 Colussy told everyone in the officer corps that no one could take any vacations until the company was right. Asked when that might be, he simply said, “When I say it is”. In fact, one of the most memorable incidents was when Jack Crawford, the CFO, was discovered to be on his annual sailing vacation. Colussy said “Track him down and tell him to come back!” Jack Crawford did come back but Colussy had alienated Jack for the duration of his short stint as
102 ~ Eastern Provincial Airlines
President. One of my first conversations with Colussy was about my favorite subject, the undercapitalization of the airline by the parent. Not surprisingly, Dan, was alive to that issue and told me that it was one of the job interview points he made with Sinclair when they first met. Dan assured me that things would change in that regard. Starting 1983 with a debt to equity ratio of 7.3 to 1, CP Air issued common shares in exchange for aircraft that had been leased from CP Limited, lowering the debt equity ratio to 1.6 to 1. We followed up by buying CP Hotels for $115 million from CP Limited, paid for with preferred shares. This transaction further improved CP Air’s debt to equity structure to 1.2 to 1. These transactions were done for two reasons: first to establish a more sustainable capital structure for the Airline, and second, for tax minimization purposes, meaning that CP Limited as a consolidated entity would pay less income tax by using the accumulated tax losses of CP Air to offset the taxable position of CP Hotels which was a profitable entity. In addition, the accelerated capital cost allowance for aircraft would also provide more shelter for profits from the hotels whose buildings provided relatively small capital cost allowances to shelter income. This would later work to the detriment of PWA whose complex acquisition of CP Air would trigger a hollowing out of
Chapter 11 ~ The Kremlin Protocol ~ 103
the underappreciated capital cost pool of the airline, an oversight on the part of PWA’s acquisition team that cost it dearly! I remember the Eastern Provincial Airline acquisition well – I was among the due diligence team sent over to Gander, Newfoundland where EPA’s head offices were located. I went to the hangar at Gander airport to “kick the tires” and was flabbergasted to discover a gleaming red Ferrari sports car in the corner of the hangar. It was a company car! Apparently Harry Steele, the President of EPA used it to show his best customers around St. John once a month! I duly reported this find with the recommendation that we sell the car in case the Kremlin heard about it! Sheldon Stoilen and Captain Bob Weatherley were respectively assigned the roles of President and VP Flight Operations for EPA and that marked the beginning of several years of long distance commute for those two who had to travel from Tsawwassen near Vancouver to the newly relocated EPA headquarters in Halifax every week! It was a grueling trip that took nearly eight hours each way. There were no non-stop flights between Vancouver and Halifax then (and come to think of it, now either!). We used to joke that it took as long to get from Vancouver to Halifax as it did to get to Tokyo! I am sure Sheldon and Bob will have one good memory: the lobsters. Their friendship from those days continues today (2013) and they play
104 ~ Frank Basirin
golf together every Wednesday at Shaughnessy Golf and Country Club in Vancouver.
Chapter 12 ~ How ten tamales drove Colussy to consider buying out Wardair. The follies of the McKinsey inquisition
Another memorable incident involved our Charter division, better known as CP Holidays, a chronic money loser. Through the years it survived because the head of the charter division used rather colorful language to describe his results. Frank Basirin was a character who reminded me of “Columbo,” the famous TV detective. He too had a cigarette hanging off his lip at all times. He was a likeable fellow whose downfall was caused by a lack of sound financial advice from his finance team in the charter division. For years CP Air had priced charter fares using incremental (marginal) costing. It may have been appropriate when we used downtime aircraft (planes that would otherwise have sat overnight on the tarmac) to run charter flights to southern sun destinations, but when CP Air Holidays expanded to London, England, and other longer haul destinations, the philosophy of marginal costing began to lose favor with the financial evaluations and the corporate accounting departments. We felt that the losses being reported by CP Holidays
106 ~ Max Ward
were unsustainable and understated. Imagine, return airfares to London Gatwick at $520 per person. Although wildly successful load factor wise, such a price did not produce any profits after taking into account the full cost of operating the program. At a budget meeting with Colussy in 1983 Frank Basirin described a projected loss of close to $10 million dollars for the next year this way: “We’re only going to lose ten tamales next year,” and Colussy in his inimitable stutter replied, “S-s-say again, how many what?”, to which Basirin replied “Ten million buckaroos”. Although we all knew this was Frank’s way of lightening the mood in the room, the Columbo act didn’t carry off as well as he thought it would and that sealed the fate of the charter division, much to my personal relief. Following that meeting Colussy instructed the VP Marketing, Dick Huisman, to prepare to shut down the charter division. On a separate track he and Sheldon Stoilen (his deal maker) decided to approach Max Ward to buy it out. We felt that we could use one year’s charter division losses to buy out Wardair and a deal was tentatively worked out with Max Ward to buy him out for somewhere between $6 and $10 million. Wardair had been having a rough go of it and was a financial basket
Chapter 12 ~ Colussy and Wardair ~ 107
case (and so it remained for a long time). As fate would have it, when Colussy and Stoilen went before the Board of CP Limited in Montreal, Fred Burbidge, then Chairman of CP, rejected the proposal because he doubted the wisdom of acquiring money-losing operators. This was a dramatic change from the long-held belief in Windsor Station that it was the correct strategy to consolidate Canada’s aviation industry. If only we could have fast-forwarded from 1984 to 1989 when Wardair was bought for $268 million by PWA Corp., Burbidge might have changed his mind. The failure to acquire Wardair in 1984 was probably something that so rankled Colussy that he may have lost his appetite for the game. Shortly afterwards he left the airline. Rumour had it that he would resurface again when he was party to an unsuccessful and hitherto never reported bid to buy CP Air by a rich tycoon from British Columbia at the same time. Colussy was unlucky in his timing because during his term at the helm (from 1981 through 1984), the world was going through a severe recession that has only been surpassed by the great credit bust of 2008/2009. Straits were so dire that towards the middle of 1983 he was inspired to bring in the consulting firm of McKinsey & Co., with the express mandate to streamline and reorganize the airline by a process of unit costing designed to show how uncompetitive CP Air was compared with Air Canada. Over a period of months during which the large McKinsey
108 ~ Dan Colussy
team crawled through as many nooks and crannies that they could find, I and many colleagues at CP Air had heated discussions with them over the data and information they produced. Their sole aim was to justify downsizing the company by producing “information” that showed how unproductive the airline’s pilots, flight attendants and maintenance operations were. When the exercise was completed I recall the bill from McKinsey totaled more than US$4 million and there was a stack of reports (measurable in feet!) that were handed over. Unfortunately those reports never saw the light of day as Dan Colussy announced suddenly in 1984 that he would be leaving the airline for a job at UNC Inc., a company based in Washington DC. I remember saying to Jack Crawford that it was somehow obscene that we spent that much money on a US consulting firm – for nothing. When I think back on Colussy’s time at CP Air, I recall a conversation with him early in his tenure as CEO like it was yesterday. Around 8 p.m. he summoned me to his office to talk about “something important. He wanted to tell me that he had heard that I was a popular and well-liked guy at CP Air and he just wanted me to know that if he continued to hear that the Comptroller was a nice guy, he would have to replace me with someone else more ruthless. To be told that one has to sacrifice one’s nature to fit into a job was a bit disconcerting for me but it did give me some food for thought as to the nature of the job of Comptroller.
Chapter 12 ~ Colussy and Wardair ~ 109
On another occasion while at a party he threw at his newly acquired company-subsidized, 10,000 square foot house in West Vancouver (with an indoor swimming pool), he advised me that the best way to get ahead in a career is to send the kids to boarding school and the wife on shopping trips so that one can concentrate on working 16 hours a day. I had just returned from Hong Kong where I visited my parents and was told by the Hong Kong staff that Mrs. Helene Colussy had been in the Colony recently with a big shopping list. Our executive secretary, (Helen Chan), worked for Harry Hargadon, the General Manager in Hong Kong. She was a very influential local personality and known to be able to provide a personal Rolls Royce for visiting VIPs from head office. On this occasion she had accompanied Mrs. Colussy to the new territories to shop for gold leaf antique wood carvings much like those which adorned the feature wall of the original Mandarin Hotel. I believe that Dan Colussy brought some positives to the airline. He introduced the executive team to the previously unknown ritual of executive committee meetings where everyone’s pants were liable to be figuratively “pulled down” as team members felt free to hold each other accountable for screw-ups. I felt these meetings democratized the executive suite and replaced a previous culture of unspoken criticism which fomented disharmony among executives and stifled productive discussion and problem-solving. Dan was always direct and to the
110 ~ Jack Crawford
point. When he assigned Captain Weatherley to be VP Flight Operations at Eastern Provincial he said “You’ve got 90 days to fix the pilot problem over there. We either have labour peace or we shut down the airline”. There was never any ambiguity about what he meant. As I said earlier, his advice to me on how to be a Comptroller was just as forthright.
Chapter 13 ~ A Tour Company with a difference
In Banff National Park, overlooking the valley of the Bow River, surrounded by the towering Rockies, and the blue skies overhead. Sir William Van Horne once said, “Since we cannot export the scenery, we shall have to import the tourists!” (Quoted by Ken Dakin at the Empire Club dinner honoring the 50th anniversary of CP Hotels). In the history of CP Air there existed a little known but highly profitable subsidiary company that was well known in the business as TransPacific Tours Limited (TPT). Early on in my career as Director of Corporate accounting Jack Crawford recommended that I be named to its board of directors. Later I was named President (effectively non-executive chairman) of the company and stayed in that position until I retired in 1992. The fact that the presidency of a tour operating subsidiary was assigned to a Finance division individual puzzled me at first until Jack explained to me that it was done in order to keep the company out of
112 ~ Kaz Sato
the hands of the marketing division so that they would not be tempted to “influence” its operating mandate to support marketing’s primary goal of selling airline seats. The experience of chairing a company, however, was very valuable in my ongoing personal and career development and I suspect that this was one of the objectives that Jack had for me. This little company was run by a General Manager, named Kaz Sato. He was a Japanese national who worked primarily out of his offices at 885 Dunsmuir Street in Vancouver. Kaz was always a joy to work with. He displayed a wry sense of humor but was intensely serious and diligent about the business he was running. When my offices were downtown at the Bentall IV on Dunsmuir street, I often ran into him late in the evening at a nearby Japanese restaurant where we would have a quick sushi together before heading back to put in more time at our respective tasks. Kaz’s job had its perks and one of them was that he was often invited to golf tournaments. I had no interest in golf in those days but I have subsequently realized that I missed out on one of the better things in life! The company’s business was in-bound tour operations. It was not an air charter operation as most people thought. Its customers were primarily Japanese tourists who bought tour packages (mostly guided hotel and land transportation packages) that took them to visit famous
Chapter 13 ~ A Tour Company ~ 113
Canadian heritage sites like Banff Springs, Lake Louise, Niagara Falls, Quebec City, Montreal, and even as far as Prince Edward Island (Ann of Green Gables). TPT’s affiliation with the CP family transcended organizational pettiness and Kaz was able to negotiate favorable access to CP Hotel’s rooms in peak seasons without sacrificing the hotels’ revenue per available room (revpar). CP Hotels just happened to have the most desirable hotels in the preferred Japanese tourist’s itinerary: Banff Springs Hotel, Chateau Lake Louise, the Royal York, Chateau Champlain, and Chateau Frontenac. The Japan route was so important to CP Air’s profitability that it really needed flights originating from Japan to be full so that returning flights would also be full when the Japanese tourists returned home. The Japan route had a traffic origin and destination imbalance in that there were few Canadians visiting Japan as tourists. As a result, while TPT’s revenues were comparatively small in relation to CP Air’s, it brought much needed traffic to our aircraft. The brilliant business model that enabled TPT to be successful year in and year out was that it was sold in Japan as an airline independent tour package. While it was true that Kaz Sato was encouraged to (and did) actively persuade Japanese travel agents to sell the package in conjunction with seats sold on CP Air, the quality of the Canadian land product was sufficient to ensure that it was the preferred product for Japanese travel agents. TPT’s value as a land tour operator was recognized by
114 ~ Keith Pope
John Pastuszynski while he was the airline’s country manager in Japan and when he was transferred to Europe he asked Kaz Sato to develop suitable tours for European markets. This became a successful addition to TPT’s business as more and more European business came its way. I must confess that I made a critical error of judgment in 1987 when I decided to experiment with opening a land tour operation using the TPT platform in Sydney, Australia. I mistakenly believed that the profitable airline-independent model could be exported successfully and despite the fact that Kaz Sato and our GM Keith Pope gave it their best efforts, the venture failed and I closed it two years later. The lesson, I learned was that while Australia’s allure to the Japanese tourist was equally as great as Canada’s, those tourists had different tastes. Those wanting to visit Canada were after beautiful, pristine scenery; visitors to Australia were looking for adventure, sea and sun. TPT’s brand in Japan did not portray an adventure tour brand. After I left the airline TPT was sold to Brewster Transport and Tours in 1996 and ceased to operate as a separate entity in 1999 when it was fully merged into the operations of Brewster, a subsidiary of Viad Corporation of Arizona, a small cap S&P 600 company. Now that I am in my retirement, my wife Sandra and I play golf
Chapter 13 ~ A Tour Company ~ 115
with Kaz Sato and his wife Noriko on weekends for a dollar a hole. Of course, the stroke-a-hole handicap that I get from him ensures that I don’t often lose too badly. Kaz still has his way of giving me that wry smile after I shank a shot, just like he used to do whenever we brought up Australia.
116 ~ Don Carty
Chapter 14 ~ The arrival of Don Carty and the beginning of the end……..
Don Carty was the next President and Chief Executive Officer to be appointed by Windsor Station. Don was the Chief Financial Officer of American Airlines when he made the switch. Prior to joining AMR he had a short stint at Air Canada. Don’s main claim to fame at that time was his successful masterminding of a scheme to swap eight of AMR’s Boeing 747 aircraft for fifteen of Pan Am’s DC10 aircraft. That happened in October of 1983 and he came to us in the spring of 1984. I heard him describe how complex the transaction was. It involved turning over the ownership of all those aircraft at a precise point in time at a number of airports. When I asked him why the fleet switch was a good thing he simply said that big airplanes were harder to fill and more small airplanes allowed more flight frequency. I should have known that the same fate would befall CP Air’s B747 fleet……….. Very soon after his arrival Don became highly vocal about the fact that CP Air’s headquarters should not be located in the operations center of the airport. He felt that in order to portray an image of a business -friendly airline the executives needed to be located in downtown Vancouver. It was not long before all the officers of the company except
118 ~ Stephen Wolf
the VP of Maintenance was moved to the Bentall IV building in downtown Vancouver which at that time was one of the premier class A buildings in Vancouver. Amid much fanfare and promotion we found ourselves moving into three full floors of that building. I moved into the 24th floor’s northeast corner office while Carty occupied the northwest corner office. Of course it was three times the size of mine. I made the commute every morning from the suburb of Tsawwassen into downtown Vancouver and in those days it was possible to do that commute in about 35 minutes compared to the hour or more that it takes in today’s traffic conditions. Every morning, I would arrive at or before 7 a.m. but Don would be there before me, usually talking on the phone to his pals in the US or harassing the SOCC (system operations control centre) on the first flight conference call of the morning. Don told us stories of how Bob Crandall listened in every day to the SOCC calls at AMR just to keep everyone on their toes and he was going to do the same at CP Air. It was a great idea as CP Air’s on-time performance [2] was slipping in those days. One morning I wandered over to his office and overheard him saying something like “You dirty dog, you must have put a few million bucks in your jeans on that deal!” It turns out that his colleague, Stephen Wolf from AMR, had moved to Flying Tiger as its CEO and had just taken the company public and cashed in on his options. In those days, lots of
Chapter 14 ~ The Arrival of Don Carty ~ 119
Initial Public Offerings (IPO’s) were happening along with mergers and if one were slow on the uptake, one would miss the opportunity of a life -time to get rich! Stephen Wolf later left Flying Tiger in 1987 to head Allegis Corporation, the parent company of United Airlines. Not long after Don arrived he and the Fleet planning VP, Brent Statton, as well as Ted Shetzen, (the VP of Strategic planning) got together to figure out a way to deal with the declining load factors on the Orient route (Hong Kong and Japan) which had been suffering declining ridership with the world-wide recession. They applied the idea that one large Boeing 747 airplane with four engines pushing 400 seats through the air was less economical than a smaller long range DC10-30 aircraft with three engines pushing 300 seats through the air because there was more chance that the DC10 would be fuller than the 747. And so, with the objective firmly set, the exercise began to develop the data to justify the decision. This decision was more probably made in the offices of AMR the year before when Don engineered the B747 for DC10 exchange with Pan Am and there was no reason to question the economic justification that had already been provided once, was there? The task fell to aircraft brokers to find a seller of long range DC1030 aircraft and a buyer for B747-200’s. As luck would have it, a Floridabased aircraft broker located Pakistan International Airlines (PAL)
120 ~ Terry Salman
which was in the market to acquire B747-200 aircraft and would sell their DC10-30 aircraft in return. As fate would have it, they had four DC10-30 aircraft and would let them go in exchange for CP Air’s four B747-200 aircraft on an even trade. The broker in the middle was paid a fee for his services and voila, the deal was done. This news came much to the chagrin of the maintenance division people whose inspection of those DC10 airplanes in Pakistan resulted in their being given the nickname “roach coaches.” Their cleanliness and hygiene had been neglected by PAL. This exchange was taking place at a time when world aircraft prices had skyrocketed and even used B747’s fetched a handsome price. The more recently built DC10-30’s from PAL had a similar market price because demand for DC10 aircraft was not as strong. So it was that the four B747’s that CP Air had purchased in 1973 and 1974 for $26 million a piece were worth the same as the four newer DC10’s from PAL. But with the exchange at market rates the transaction would have yielded an accounting gain for CP Air as the depreciated book value of the B747’s was less than $30 million. The DC10s for 747s scheme was based on the premise that the benefits of point to point nonstop service would bring about greater profitability from the Japan route while a new nonstop Vancouver – Hong Kong Kong service would enable CP Air to launch nonstop service to compete with Cathay Pacific’s nonstop B747 service. This premise
Chapter 14 ~ The Arrival of Don Carty ~ 121
was flawed only in that the long range DC10 aircraft was not able to meet its promise of nonstop flying to Hong Kong in the winter months and despite load capping resulted in an appreciable percentage of westbound flights: having to stop for fuel in Taipei or Tokyo. In the summer months, flying from Hong Kong eastward to Vancouver was punitive on loads because the hot temperatures at Kai Tak Airport meant that full load capacity could not be used without having to stop for fuel in Tokyo. The flight would be guaranteed to stop for fuel if prevailing winds meant a take-off path towards Lion Rock. These technical shortcomings of the DC10 were compounded by the inferior cabin air circulation when fuel conservation practices were necessitated for nonstop operation. The DC10 to Hong Kong service was one of the dark periods for CP Air’s flight crew, flight attendants and ground staff in Hong Kong. I should not forget the yeoman’s work done by the SOCC people (system operations control center) because more often than not, aircraft delays and cancellations caused by duty hour restrictions caused havoc with rescheduling and connections. So it was not long after that that Don Carty told a few of us (Jack Crawford, Dave Murphy and me) to get ready to write a prospectus for a CP Air IPO. We were sworn to secrecy and worked together with Terry Salman, a Partner of Nesbitt Thompson in Vancouver, during the spring of 1986 on a prospectus for an initial public offering of CP Air stock.
122 ~ Nordair
Jack, Dave and I diligently worked in suppressed excitement at the opportunity to spread our wings and become masters of our own fate, unaware that the accounting world would intervene to put this scheme into the trash bin! I might add that the prospect of pecuniary gain from an IPO was a powerful incentive for us to put our shoulders to the wheel!
Chapter 15 ~ The Carty era – the consolidation of Canadian aviation
It was very evident that Windsor Station (the Kremlin) had given implicit permission to Don Carty to continue the buying spree that Dan Colussy started with the acquisition of Eastern Provincial Airways. Soon after Don’s arrival we went on the hunt again, this time picking off Nordair, the Montreal-based regional airlines that would help us to establish a Montreal hub with its instant credibility with the francophones. It was always a bit of a mystery to me why CP Air struggled so mightily in Montreal with its image of a western-based airlines when its parent company was a major Quebec-based conglomerate, but the problem was no doubt exacerbated by the fact that Air Canada was headquartered in Montreal. One of my memories involving the Nordair purchase was walking up and down University Avenue in Toronto with Dave Murphy visiting the large Life Insurance companies and investment firms with check books
124 ~ Rhys Eyton
at the ready to buy their holdings of Nordair stock. This stealth maneuver was done in order to accumulate sufficient voting shares in Nordair to overcome a minority voting bloc held by the Quebec government who were Air Canada’s allies in its strenuous objection to a corporate takeover of Nordair which they correctly felt would have created problems for them in the Quebec market. We were successful in gathering sufficient voting shares to launch, in partnership with the senior executive employees of Nordair (who all profited handsomely from their agreement to tender their stock to CP Air) a successful takeover of the airline. Carty was strategic in his thinking (some would say even Machiavellian). He knew that to survive and prosper an airline’s reservation system was a strategic asset. At the time CP Air and Air Canada were partners in the Canadian travel reservation system known as Gemini. Don, having come from AMR and familiar with SABRE’s reservation system with its more sophisticated and wider-reaching network, rich content and functionality knew it would be a better fit for CP Air. He also must have had it in the back of his mind that airline deregulation would inevitably lead to consolidation and AMR was an obvious close link that he could tap into when the time came. Over a period of many months reservations and computer technologists were sent down to AMR to explore and discuss the possible adoption of SABRE as CP Air’s
Chapter 15 ~ The Carty Era ~ 125
reservation system. This would sow the seeds of what later became a major obstacle in Canadian’s bid to survive. Don also had convinced Windsor Station that it was in the strategic interest of CP Air to acquire all the regional carriers in time to go head to head with Air Canada once deregulation’s open skies became reality. The plan had us acquiring PWA, the powerhouse Alberta carrier whose feisty President, an acclaimed financial genius named Rhys Eyton was known to be also eyeing his company’s strategic options in a deregulated Canadian system. In the winter of 1985 and spring of 1986 there were rumours of potential alliances being struck by PWA with Air Canada and with CP Air. In the spring of 1986 Don Carty had managed to woo Rhys Eyton into secret talks about merging the two airlines and Don was eagerly awaiting the successful IPO of CP Air in order to move forward with a merger in which CP Air would emerge the dominant shareholder. I knew all this was happening because once in a while Don Carty would pass me invoices from the Hotel Vancouver where Eyton stayed overnight after meetings with Carty. Those invoices were processed through the “private payroll” so that prying eyes could not see. Bentall IV offices were a veritable hive of activity in the Carty years. He had so many balls in the air that I wondered sometimes how he kept track. In one of the more bizarre assignments he ever gave me, Don
126 ~ John McDonnell
called me into his office one morning around 7:30 a.m. and introduced a diminutive gentleman dressed in a dapper suit and spit-polish shoes. “Meet John McDonnell, President of Canavia Aviation Consultants,” Don said. “He is here to sell us an airplane, a Boeing 737-200 from the Island of Nauru. How would you like to go over what he has to offer and come and talk to me about it if you think there is a deal there?” The executive team had been talking about the need to expand the fleet of B737’s to expand our Transcontinental services and reasonably priced aircraft were hard to come by so it did not come as a surprise to me that we would look for aircraft to buy. I have yet to find out why Carty asked me to do this but I dove into the assignment quickly with follow up due diligence and technical assessment assistance from flight operations and maintenance. On the deal side, I sat with John McDonnell over several meetings probing him for information. Ideally I thought that if I knew how much profit he was pricing into his asking price, I could then try to reduce that. This was somewhat unconventional thinking because his asking price was in line with prevailing market prices for aircraft of that vintage. When I actually sprung that question, he was taken aback. He asked me why I needed to know what his profit would be and I said “So you can cut that in half and we get to pay less than the market price.” McDonnell said “If I agreed to do that, can you get the deal done quickly?” I nodded and said “Carty will make that call”. When I got back to Carty he had already heard from McDonnell who apparently said that I was one of the most unconventional deal makers he had ever done business with. I am not sure if that was a compliment but in the following two years, I received three offers of employment from McDonnell.
Chapter 16 ~ On becoming a niche player – or Shetzen’s folly?
One of the most colorful characters that I met during my years at the airline was Ted Shetzen. A pear-shaped guy with a big brain and a fast mouth, Ted arrived at CP Air from Air Canada as the Vice President of Strategic Planning. I still remember his mantra of the four P’s - People, Performance, Profit and Pride. He took the senior executive team through what then was a new phenomenon called a “retreat” where we were asked to park our inhibitions and ideas (baggage) at the door and enter for a consensus team building exercise. Ted was rollicking good fun to be around because he had a way of making the complicated simple and the very simple so complicated that sometimes we’d say “ET needs to phone home”. In my role as Comptroller I inherited the dubious honor of being the guy who kept track of “private payroll” matters. Through the private payroll we paid senior executives their salaries according to their
128 ~ Ted Shetzen
contracts plus any other perks that were included. I handled Shetzen’s moving expenses which included the move of his Porsche 944 from Montreal to Vancouver as well as his apartment hunting in Vancouver. Ted’s move was jinxed. His car was vandalized while on a railroad siding during shipment and once in Vancouver was vandalized again in the Bentall IV private parking compound. His apartment hunting was jinxed because he had to live in the Mandarin Hotel for months before finding acceptable living quarters in the new Shannon Mews townhouses on Granville Street. I used to tell him that he was more trouble than he was worth but we became friends and I admired his ideas and his enthusiasm for them even when others were skeptical! Ted gave us the “Attache” brand that for a while lit up the skies (literally) over the golden triangle (Ottawa-Montreal-Toronto accounted for almost all of Canada’s business travel). Flight attendants were required to serve flambé meals in all business class B737 aircraft during the short one hour hops. This was initially a sensational success until the fare war that it inevitably sparked with Air Canada meant that the cost of providing all that extra oomph in-flight was unsustainable and Attache died its natural death in the battlefield of the triangle. A few years later, Wardair mounted a high touch service that had an even more devastating result for them.
Chapter 16 ~ Shetzen’s Folly ~ 129
Shetzen also travelled frequently and to faraway places like Singapore, Bangkok, Israel, China, Taipei, Japan, and all over Europe. He always came back with more cockeyed schemes to extend CP Air’s routes to knit a round-the-world airline network. He would call from Bangkok and talk to Don Carty to say that Thai Airways and CP Air could do code sharing. In those days, code sharing was akin to sharing one’s underwear with a friend and not universally hailed as a winner. But it was to become the de-rigueur practice of the world airlines that has turned air transportation into the commodity that it is today where the brand of the airline you are travelling on doesn’t matter so much as your ability to travel seamlessly anywhere in the world. Shetzen had the idea that we could extend our flight to Hong Kong through to Bangkok and then bargain fifth freedom rights [3] from there to London UK. When asked how we would get designation or landing rights into London which at that time was exclusively assigned to Air Canada and Wardair by the Canadian Government, he would just say – that’s the next trip! Ted Shetzen used to talk about the possibility of airports becoming shopping malls for high end luxury goods and that the flier’s “experience” needed to begin before he entered the aircraft. People used to look at him in shock and would wonder what drugs he was on. Fast forward twenty years and it is now the exception if an airport does not have entertainment and shopping for travelers. I recall Ted’s focus on
130 ~ Singapore Airlines
passenger service and the friction that his ideas caused among the senior executives in marketing and sales whose belief systems and instincts were to lower costs and fares. Ted’s mantra was quality and premium revenue. I have watched this fundamental tug of war play out in many airlines and successfully so for both camps. Southwest Airlines’ no frills services with employee ownership has been wildly successful and Singapore Airlines’ high touch, high service model catering to the service -conscious customers has been equally successful. The difference is that in these airlines, their business model is in their DNA. At CP Air the DNA which had its origins in premium service has been watered down through the hard recession years with wave after wave of downsizing and cost cutting and was now having trouble getting accustomed to something richer in the blood! Oh yes, one other Shetzen legacy was to scrap CP Air’s orange color and return to its roots and a more business-like color scheme. On December 17, 1985 CP Air changed its name back to Canadian Pacific Airlines and its aircraft colors from orange to Pacific blue on the lower portions, sky white on the upper sections, and a separation stripe of Corporate red around the middle. The CP Air motion mark remained on the tail without any orange colors. The transformation was meant to attract business travelers and to project a corporate image. Ted left Canadian Airlines in the wake of Carty’s departure in 1987 and he has since dabbled with other ventures including the start-up of Roots Air and remained involved in the travel industry. We have kept in touch over the years and every time we meet, I am still entertained by his mile a minute dialogue!
Chapter 17 ~ The Land of the Rising Sun
Japan! No one active in the business world in the mid 1980’s can forget the mighty economic juggernaut that was Japan. Labeled as an “Economic Miracle” of the late-twentieth century, the country’s standard of living soared to among the highest in the world and Japanese people had the world’s longest life expectancy. By the 1980s Japan’s GDP per capita rivaled or even surpassed many Western economies and the country became the world’s largest creditor nation. By 1985 mainly as a result of the Plaza Accord that sought to weaken the US dollar against the yen and the deutche mark, the yen appreciated significantly against other currencies. The combination of a high standard of living and a rising currency led to wave after wave of Japanese tourists armed with the mighty yen and eager and willing to buy travel experiences. This trend gained momentum in the mid 1980’s. The travel industry was of course a major beneficiary of this rise in
132 ~ Mr. Yoshida
wealth and the rush was on by all foreign airlines serving Japan to increase flight frequencies. CP Air was no exception. Not only was there more or less a guarantee of high load factors but the relatively high fares charged to Japanese tourists made the Japan route the most profitable market for the airline. I can recall an executive committee meeting during which Ted Shetzen was lamenting the difficulty we were having with obtaining more landing and gate slots at Narita and Don Carty’s exasperation with the slow progress that was the hallmark of horsetrading with Japan Airlines who influenced the outcome of additional flights as well as slot assignments. Don actually said something like, “If we don’t get this sorted out soon we should go bomb those guys again!” The importance of the Japan route was paramount to us! In mid 1985 I was Comptroller of CP Air and I had been invited by our General Manager in Tokyo to attend a retirement party in honor of our accountant, Mr. Yoshida. So on Saturday June 22, 1985, I boarded our B747 aircraft, CP flight 3, for the eight hour journey from Vancouver to Tokyo. We arrived at Narita airport about fifteen minutes earlier than scheduled and I was quite happily clearing customs when I heard a muffled bang and what felt like a tremor. I thought it might have been an earthquake but it quickly became obvious that something was awry as all activity seemed to pause. Some time went by and there was a growing swell of travelers milling around empty baggage carousels in the arrivals hall. I remember thinking it odd that there was no public
Chapter 17 ~ The Land of the Rising Sun ~ 133
announcement by the authorities but soon enough people were talking about a bomb having gone off in a baggage container that had been unloaded from an aircraft. In those days I travelled light and had only a suit bag and a briefcase with me so I cleared customs, exited the terminal, caught an airport limousine bus for Tokyo, and went into the city. It wasn’t until Monday when I went into the office that I learned that not only had a bomb gone off at Narita, but the bomb had come off my flight! Imagine, had flight three been on time, the bomb might have exploded in mid air! [4] This was a mighty Joss [1] moment for me! While Japan would play a big part in the airline’s fortunes in years to come it also produced a very special friendship for me. Franz Metzger was our airport manager at Narita and I came to know him well through the years.
134 ~ Pakistan International Airlines
Chapter 18 ~ FASB and how we lost the company
The Financial Accounting Standards Board (FASB) had rules in place that prescribed the accounting procedures for exchanges of non-monetary assets. The narrowness with which this rule was applied to CP Air’s B747/DC10 exchange with Pakistan International Airlines would cause the company to fail in its bid to launch an initial IPO and from there to springboard a merger with PWA. While Carty was busy talking Eyton into a merger which both leaders believed would result in synergies and economies that would create a formidable competitor to Air Canada, he was anxiously awaiting news that we would have clearance from our auditors to book the nearly $100 million gain from the B747 for DC10 exchange. This was a crucial piece of the puzzle because without the accounting gain CP Air’s balance sheet was anemic compared with PWA’s which had just benefited
136 ~ Price Waterhouse & Co.
from a sale-leaseback arrangement that put $300 million in cash in its treasury (along with a much misunderstood lease obligation of the same amount). This arrangement did not appear on its balance sheet because of a little known accounting rule that any high school student with some math skills could engineer ie. for a lease to be classified as an operating lease which allowed companies to not include it as a balance sheet liability. Without a stronger balance sheet the task of a successful initial public offering would be almost impossible, and without cash PWA would not accept a merger that had them losing majority control. The task of convincing the accountants at Vancouver’s Price Waterhouse & Co. (this was before their merger with Coopers) to allow the booking of the gain from the sale of the B747 aircraft fell to me and I was initially given comfort by the senior partner that this would not be a problem but that they would have to check with their practice standards people in Toronto. The accounting rule then was that if an exchange of plant and equipment between two entities did not involve an actual exchange of money and if the exchange did not have commercial substance then the transaction would be recorded at original cost. This was not the case with CP Air as it was exchanging older B747 aircraft for newer DC10-30 aircraft which had higher commercial utility to CP Air’s business and would create greater economic returns than the B747’s.
Chapter 18 ~ FASB and how we lost the company ~ 137
I spent many sleepless nights creating spreadsheets and discounted cash flow models to convince the accountants that the transaction actually resulted in commercial and economic value to CP Air but alas: the narrow-minded FASB and the people at Price Waterhouse refused to budge. I even contacted the professor at Stanford University responsible for the FASB rule to explain our case but to no avail. And so, with a one page letter Price Waterhouse dashed the hopes of Carty and CP Air for greater glory. As a postscript to this case, in 2004 the FASB changed its accounting rule to allow for recognition of fair value of non-monetary asset exchanges. If only this happened when we needed it to happen in 1986 CP Air’s history may have been changed. Joss![1]
138 ~ Bill Stinson
Chapter 19 ~ PWA – the takeover of CP Air and the emergence of Canadian
With the failed or rather, unlaunched IPO, Carty was now faced with the job of convincing CP Limited to put operating money into the airline and to support the merger with PWA with its own capital or more money. Carty was in a quandary with three options. 1) to forge ahead and merge with PWA with help from the Kremlin; 2) have Eyton buy CP Air from CP Limited and probably lose his job while at it; 3) see Eyton join up with Air Canada and watch CP Air go under. Don Carty faced one of his many moments of truth and decided that the best thing for the shareholders of CP Air was a sale to PWA. Don knew that his time was limited once the transaction was done and he set about making overtures to go back to AMR. November 24th 1986 will go down in my memory as one of my most memorable days. Bill Stinson, the CEO of CP Limited had been sitting in on the review of CP Air’s 1987 business plan and observed that the
140 ~ Bob Weatherley
airline was projecting another loss year. After the meeting Carty and Stinson left the building and several hours later, returned to announce to a small group of the senior executive team that they had reached an agreement to sell the company to PWA. We were told to keep the development under wraps while the details of the agreement were worked out and an announcement was to be made in a few days. I was involved in that transaction for we had to decide how to divest the CP Hotels operations and segregate them from the sale. I conferred at length with CP Limited’s finance people and in particular Henry Bretischer on how best to handle this. The best outcome for CP Air’s shareholder was a sale of the CP Hotels operations to CP Limited for $300 million cash with a concurrent dividend of an equal amount to be paid to the parent. We agreed on this approach with PWA’s Eyton and his CFO Kevin Jenkins who said they had no interest in buying the hotels. Other due diligence terms were agreed upon and on December 2, 1986 the Canadian aviation bombshell of the century was exploded before the eyes of an unsuspecting population and a shocked CP Air family. In between November 24th and December 2nd I flew to Hong Kong to visit my parents. I knew the flight over was being piloted by our Vice President of Flight Operations, Bob Weatherley. I think we were just over Tokyo when Bob came into the first class cabin, sat down next to me and said “What’s up?” I told him that I had something to tell him
Chapter 19 ~ The Takeover of CP Air ~ 141
as a fellow officer of the company and a good friend and that he should keep it to himself. He agreed to respect the confidentiality and I told him what was happening. Bob’s father was a trainman on Canadian Pacific trains and so Bob was a die-hard CP man. Also as corporate officer of the company he was shocked to hear this news since he had no inkling that anything like this was in the works. After we landed in Hong Kong I took the crew bus with him to the Prince Hotel where we sat and had a few drinks to commiserate with each other on the development and we met again two days later on the flight back to Vancouver. It was December 2nd 1986 and just as I had been briefed before I left Vancouver; an announcement was made to all CP Air staff worldwide that PWA had acquired CP Air. When we reached the gate in Vancouver ground staff met us to take us to the operations centre for a full briefing on the takeover and transition plans. Bob Weatherley and I dutifully wandered over to the Operations Centre to witness what must remain in my memory as one of the most traumatic days for CP Air’s employees up to that point. It is safe to say that while there was a series of shocks and traumas that came in the wake of this quake, this one served to instill a feeling of vulnerability in the hearts and minds of CP Air people from which they never quite recovered.
142 ~ Murray Sigler
The following very impersonal announcement came from PWA in early 1987: “Pacific Western said it appointed president and chief executive Rhys Eyton as chairman and chief executive in the new management structure and Murray Sigler as president. Sigler was previously president of Pacific Western’s airline unit, Pacific Western Airlines Ltd. Pacific Western acquired Canadian Pacific Air Lines for 300 million dollars last December from Canadian Pacific Ltd., Canadian Pacific Air Lines said president and chief executive Donald Carty and four senior vice-presidents resigned last week. Carty said in a company memorandum that he had accepted another senior post in commercial aviation and that some of the vice-presidents were taking early retirement and others were resigning for personal reasons. Pacific Western said the new management structure “will facilitate our objective of proceeding quickly to successfully position ourselves in the marketplace as a single airline network beginning this summer.”
This announcement came just a few months after PWA had announced they would run CP Air and PWA as separate airlines for some time in order to explore ways for an orderly merging of functions and staff.
Chapter 20 ~ Some funny things about a backwards take-over
The early days of the PWA takeover were at times funny and at other times sad but at no time were they boring. It was early in December, a few days after the world was shocked by the takeover that PWA Corp. had decided to run the two airlines separately without a merger of executive staff and workers. Don Carty also said that the PWA team would be arriving to do their due diligence that morning. My northeast corner office window at Bentall IV offered a view to the square below and I kept a watch for their arrival. At about 9 a.m. I spotted several stretch limousines pulling up at the square below and out trooped the “conquerors.” “Funny,” I thought, “how come they arrived with only three people in each stretch limo? Maybe their cowboy hats were too big or something!” The first meeting of the executives of the two companies occurred in the executive boardroom. Present were Murray Sigler (the President of PWA) and Kevin Jenkins along with what was an unknown species at CP Air up till then: gentlemen with titles of Executive
144 ~ Ian Bootle
Assistant to the President and Executive Assistant to the CFO. The meeting was cordial but there was tension in the air and although the PWA team tried their best not to gloat it was obvious they were the landlords now. Never in my time at the airline did I ever witness even the CEO of CP Limited arrive at our offices in a limousine so I knew that we were dealing with different folks who had a different view on frugality. I spent the next few weeks and months working on the details of the sale and on a weekend, shortly after the announcement of the takeover, I received a call at the office from Jenkins and his finance people in Calgary. Jenkins opened the conversation by saying that he did not recall the deal included or contemplated the hotel sale transaction. I listened without comment and he then said that because CP Air sold the hotels to CP Limited for $300 million there would be a substantial hollowing out of the unexpired capital cost (UCC) pool for tax purposes at CP Air and that this would mean that a substantial amount of the purchase price of $300 million that PWA paid for CP Air would be allocated to goodwill which would have no tax value. Was there anything we could do to change the structure of the deal? While I was sympathetic to his concern I was unable to fathom how the deal could be undone at that late stage and I advised him to talk to CP Limited. I don’t really remember how the conversation ended but I am sure he hung up on me. I had heard he was a financial wizard and was surprised that he had not
Chapter 20 ~ A Backward Takeover ~ 145
focused in on the hotel transaction sooner. I was later to have further serious disagreements with his approach to debt financing and his professed leanings toward the Michael Milken school of financing i.e. cash is king and never mind the debt. Michael Milken later became infamous for his junk bond schemes. He was imprisoned for ten years (later reduced to eight) and was permanently barred from the securities industry by the SEC. Another funny thing about the PWA takeover was the rather quaint notion of time zone differences in the world by some of their senior executives. I had been given a new assignment by Rhys Eyton who appointed me Vice President of the Pacific division with responsibility for CP Air’s operations in the Pacific. This included our operations in Japan, Hong Kong, Singapore, Australia, New Zealand, Fiji and Honolulu. I was in Hong Kong for a business meeting in the spring of 1987 when I received a phone call at one o’clock in the morning in my hotel room. When I answered, I was told, “Please hold for Mr. Bootle.” I must have been on hold for two or three minutes when Ian came on the phone and said he was glad to be able to catch up to me in Hong Kong because he had some questions to ask me about CP Air’s accounting policies which he needed to clarify as the incoming Comptroller. I was curious as to whether he knew what time it was and he said “Oh, it’s 11 a.m. here in Calgary. What time is it where you are?” When I told
146 ~ Ian Bootle
him it was past midnight in Hong Kong he appeared genuinely surprised and was suitably apologetic. He really thought there was only a few hours’ difference! I could not help but chuckle as I went back to sleep thinking he was going to have a rough time of it with the finances. Ian Bootle was a nice fellow who was doing his best and I did not hold this incident against him. He was one of those fired by Jenkins in 1996 in the wake of a scandalous loss. Ian Bootle was not implicated in any wrongdoing but heads had to roll and his went with the territory. In 1988, about six months after the takeover by PWA, I found out something else that was astounding. After searching fruitlessly for the financial results of the Pacific routes I was informed that the accounting department had discontinued producing route statements and that PWA no longer wanted results by segment of operation. Their main focus was on cash on hand and liquidity. I agreed that those were important things to keep their fingers on but I suggested that the profitability of the various routes the airline flew must remain at the forefront of senior management’s attention. After all, misallocation of capital resources (aircraft specifically) and inadequate schedule planning are the main causes of airline failures aren’t they? The answer given to me was “Rhys doesn’t look at those things”.
Chapter 20 ~ A Backward Takeover ~ 147
It was a funny time. At CP Air we prided ourselves on being able to close the books within five business days of the month end and have route results within two weeks and distributed to all senior management staff for information. This standard operating procedure changed without explanation or notice by the acquiring company. There was no consultation and people were left to guess at operating results and wonder what information would be available. It was my first experience with the opaqueness of information inside public companies where limitations on the distribution of sensitive information causes information to disappear from view because financial results are held close to the vest by the CFO and CEO. This was driven by the fact that financial markets’ bloodlust for information needed to be controlled so that any inkling of how the company was faring had to be strictly controlled and that included no leakage within the company, even among its officers.
148 ~ Wardair
Chapter 21 ~ Wardair – finally and sadly!
In 1988 Wardair was quite obviously suffering financial problems. In the airline industry money from advance ticket sales often serves as the airline’s operating cash flow. In Wardair’s case the fall of 1988 was particularly dire in terms of its passenger loads and they launched a series of desperate measures including one which came to our attention. This “promotion” had Wardair promising one free ticket for every regular price ticket bought for a flight in the following spring. I remember being in a marketing meeting when Terry Francis brought this up as a competitive scenario. I recognized it for what it was – a ponzi scheme. I suggested to Terry that our response should be to match that offer and better it by awarding triple points for advance ticket purchases. I can’t recall the exact competitive response we actually used, but it was sufficient to collapse Wardair’s hopes for beefing up their treasury. The saga played out over Christmas of 1988 and January 1989 when
150 ~ Kevin Grayston
Rhys Eyton bought out Max Ward’s Wardair with $284 million for an airline that had zero net worth and $700 million of debts. This transaction was widely crticized. especially the size of the deal. It was generally believed that Max walked away with more than $80 million from that pay day. The deal was hatched so quickly that once again, the senior officers of the airline were completely caught by surprise and this was becoming Rhys’ trade mark: you can never tell what is around the corner! In the years that followed there were many rumours about why Rhys paid so much for Max’s airline. The most compelling (and one that I believe to be credible) was that Max had connections in high places in Ottawa and over Christmas he had convinced the Transport Ministry that Wardair would be bankrupt any day, leaving thousands of travelers stranded along with a massive layoff of staff. He may have convinced the Transport Ministry that a potential suitor was PWA who coveted Wardair’s London, England route rights. The story goes that Rhys Eyton received a phone call from a very senior Minister in the Canadian government with the suggestion that he could do the government a large favor by taking Max off the hook. An even more sinister rumour had the same minister threatening to award Air Canada second carrier designation to Canadian’s Tokyo and Hong Kong routes if Eyton did not play ball. There has never been confirmation of this story but perhaps one
Chapter 21 ~ Wardair ~ 151
day Rhys Eyton might write his own memoirs and tell all! I recall that immediately following the Christmas break in 1988 Rhys sent a team of finance experts including Kevin Grayston and Bruce Nicol to do due diligence reviews at Wardair’s offices in Toronto. It was not long before they telephoned Eyton and Jenkins to advise that the company was within days of zero cash and had no net worth and lots of debt. They strongly urged caution. This did not seem to deter Eyton and Jenkins as they appeared to be committed to moving ahead with their agreement with Max Ward. Both Kevin Grayston and Bruce Nicol had worked with me at CP Air so they confided this information to me as part of the CP Air network and I merely filed it in the back of my mind to keep a closer eye on the company’s financial condition from then on. Once again, Rhys’ operandi was to avoid a massive lay-off scenario by assuring the public, employees and the market that PWA would run Wardair as a stand-alone airline. He even went so far as to appoint Jenkins as Wardair’s president. It was killing two birds with one stone: Jenkins had ambitions to be President of Canadian Airlines International (CAIL), a position that was occupied by Murray Sigler, Eyton’s right hand man for many years. Jenkins’s move to Wardair was Eyton’s way of giving his protégé some experience at the helm of running a fairly large airline in preparation for succession at CAIL. Even then Eyton showed the traits of a good CEO whose focus was in building bench
152 ~ Murray Sigler
strength. It was, however, great corporate political fodder as people began to take bets on how long before Jenkins unseated Sigler. Murray was the far more approachable executive of the two and many former PWA executives had deep friendships with him. I was to develop a very cordial and respectful relationship with Murray in the ensuing years from 1987 to the time I left the airline in 1992. Jenkins on the other hand was a different kettle of fish but more on that later. Wardair’s people were not used to the management style of PWA. They bridled against the focus on cost-cutting and service reduction and were unable to reconcile themselves to the fact that it was the long stem roses, free champagne and steak dinners in their business class cabin (sold at economy prices) that drove them to ruin. To this day there are people who bemoan that Wardair’s fabled service was spoiled by the PWA takeover and to those people I suggest they ask themselves whether they would run a business that lost $1 million a day just to build a legend of service. When I looked into the flight attendant staffing levels of Wardair compared with CAIL, it was very evident why people thought they got better service from Wardair: They had almost 30% more cabin staff on every flight. I would like to put some things into perspective. The people of Wardair rightfully have a claim to a sense of pride because they did give
Chapter 21 ~ Wardair ~ 153
great service. After all, what better tools can you have than free drinks, superior food, ample staffing and new aircraft. How were they to know that the guys at the controls in head office were spending them into oblivion! I think it is a funny thing, this phenomenon: happy employees giving great service but not understanding the unsustainable economics of the business model. This is probably the underlying reason for the failures of CAIL in later years when the reality of the business model’s lack of viability began to encroach on an individual employee’s standard of living. Not until one’s own pocket book is involved does the rubber hit the road and resistance to change surfaces in unproductive and hardened positions in negotiations. The problem was, the world was rapidly bringing about change to sleepy old North America and the age of competition would wreak havoc on legacy airlines and their bloated cost (read payroll) base and unproductive (relatively speaking) work rules. Again, the condition legacy airlines found themselves in was one that had leeched itself into their existence over many years of protection and utility-like regulation combined with management’s and unions’ lack of foresight regarding the productivity gap that eventual competition would bring.
154 ~ CAIL
Chapter 22 ~ In bad times - how and how not to improve the bottom line.
Through the years at CP Air and CAIL I experienced and participated in many rounds of cost cutting and so-called productivity task forces and schemes to reduce cost and improve profits. But before I begin, let me go back to a fundamental tenet of profitable business growth: it is to meet and exceed the expectations of customers at a sustainable cost such that customer loyalty and a good reputation result in business volume growth and profits. When broken down it is a statement that reveals the magic of a successful business model. Readers will have heard over and over about CP’s and CAIL’s cost problems, yield problems and unfair competition with Air Canada problems. But very little has ever been said about the real problems they inflicted on themselves by launching a multitude of cost cutting programs over the years. Let me give some examples:
156 ~ The ‘Smile’ program
In yet another attack on its customers, the airline’s catering department revamped its in-flight meal program. Some genius decided that it would be more economical to have one common breakfast menu on all flights. This would reduce the amount of time it takes to design and specify different breakfast meals for different routes. As a result a breakfast with pork sausages and scrambled eggs was served on flights between Canada and Europe and the same breakfast was served to the Japanese on flights from Tokyo to Vancouver. The Japan route was our mostprofitable one but it was painful to count the number of uneaten meals at flight termination in Vancouver. The waste was not the problem, the problem was that the Japanese customers don’t complain – they just don’t come back. I once complained to the catering department about the lack of ethnic meals for our ethnic customers and was told that we are a Canadian airline and they will eat what Canadians eat. An example of dumb spending was the “Smile” training program that was launched by a vice president who came from Wardair. He felt that the CAIL staff at airports were in need of training on how to smile at customers. This training program was the laughing stock of the company; anyone knows you don’t ask staff to smile when some of their colleagues have just got a pink slip. The smile program was short-lived and reflected the rather naïve views of a neophyte vice-president.
Chapter 22 ~ In bad times ~ 157
Another glaring example of how not to improve the bottom line (especially in turbulent times) was the celebrated Eyton’s catalogue approach to running a business. Rhys was a financial genius, granted, but his well-intentioned but inept handling of the senior organization chart post merger of CP Air and PWA and subsequently Wardair was a classic case of stuffing the gun barrel with cotton and expecting to fire a bullet. The organization chart for CAIL was jammed to the gunnels with more than 50 Vice Presidents, Senior Vice Presidents and Executive Vice Presidents. The bureaucracy was choking for some, yet slick as goose feces for others, depending on which side of the color spectrum you came from. The former PWA people (The “blue team”) had the ability to cut through red tape very quickly while the orange team had a harder time getting through. Obviously, appointments to the highest levels were former PWA people and the former CP executives who stayed behind were placed lower down the ladder.
158 ~ Letty Regis
Chapter 23 ~ Pacific Division - the best of times, in spite of it all.
I have said over and over again in my business career that the best years of my life were spent in the Pacific division. Shortly after PWA took over CP Air, I was appointed Vice President of the Pacific division, the most profitable division of the company. I had a fantastic support team that included the marketing director for the Pacific, Larry Nelson, who became an indispensable right hand for me. I was able to keep my secretary (executive assistant) Letty Regis who had been with me since I became Comptroller in 1984 and I had a field staff of General Managers in the far-flung reaches of the Pacific. I got to know them very well and we have been fast friends ever since. I hope the reader will share this journey down memory lane with me and find this chapter of my life as enchanting as I feel it was. When I arrived on the scene as the new boss of the Pacific I quickly explained to all the GM’s that my job was to learn their business and
160 ~ Tony Buckley
to apply my financial expertise in ways that might help them run their business better. So early on I established that I was not the arriving conqueror. This made for a useful and sound beginning to my relationship with the wise denizens of marketing and expatriate attitudes. I say this with great respect for expatriates whose jobs are to run the business on the firing line while dealing with ignorant headquarters people who did not understand the local ways of business and life. One of the things that I did differently for the region’s managers was to disaggregate the economics of the many flights that we ran in the region. It was the early days of spreadsheets and computers and I laid out all the costs of operating an aircraft from point A to point B. My table showed the chain of costs from variable to fixed so that the GM’s were armed for the first time in the history of the airline with intimate knowledge of the cost of fuel, in-flight meals and amenities, landing fees, pilot’s and flight attendant’s wages, enroute navigation fees, maintenance and depreciation of and interest on the aircraft along various other charges which could be called overhead costs. I felt then and still hold this to be a basic truth that informed management makes for better management. So often I have seen companies fail to achieve maximum potential because they fail to educate their managers on the intimate details of how the money is made and how it is spent. Our major profit generator in 1987 was Tokyo and the Tokyo-
Chapter 23 ~ Pacific Divison ~ 161
Vancouver route. Tony Buckley was the Canadian General Manager who had been stationed in Tokyo since 1982. Tony was a stocky red haired Canadian with lots of energy and sales experience and had quickly gone up the learning curve on operational matters. Tony and his wife Barbara and their two children had immersed themselves in their new home and were thriving in Japan. On my first trip to Tokyo to introduce myself as the new VP, Tony came to pick me up at Narita airport and I noticed that he had driven the car himself, choosing not to have the company driver work overtime to pick me up as our flight used to arrive in Tokyo after 5 p.m. and the trip back to Tokyo from Narita took over an hour. Tony did arrange for me to be met at the aircraft door by the station manager who ushered me through immigration and customs via the VIP channel. This was a practice that was the norm whenever I went to Asia but understandably not something that happened in Australia, New Zealand or Honolulu. Tony was very generous with his time and understanding of my many questions about the operation. I sometimes felt that he suppressed chuckles when I asked a silly, inane question about the Japanese travel business and its distribution system but he would patiently guide me through the ins and outs of the customs and practices in the airline industry. I was especially impressed with his strong relations with the Canadian Embassy and Ambassador Barry Spears who later became a Director of Canadian Airlines after his retirement. Tony’s cordial and respectful relationship with the executives
162 ~ Harry Hargadon
of Japan Airlines our main competitor on the North Pacific route, was simply marvelous to behold as he maneuvered our airport slot negotiations and skillfully enlisted the support of JAL for our preferred time slots. Tony was highly respected by the staff in Japan as a man of his word. I visited Tokyo many times in my two and half years at the helm of the Pacific division and I remember those visits fondly. Harry Hargadon, whom I had met years earlier in London when I was the Director of Corporate Accounting (and with whom we shared a disastrous record for hiring a fraudster), had been moved from London to become the General Manager for Hong Kong. Harry and I had developed a good friendship dating back to our times in London when we sorted out the accounting mess so my turning up in Hong Kong as his erst-while boss was a non event. We quickly sorted out that my role was to support the field rather than the other way around and he was quite happy with that. My main concern about Hong Kong had to do with our uncompetitive DC10 service which was in competition with Cathay Pacific’s nonstop B747. I consulted with Harry about the fact that our net fares (sometime known as street fares i.e. regular published fares adjusted for normal and special travel agent commissions, most of which were rebated to the travelling customer), were lower than Cathay’s net fares. I thought that this must mean both airlines’ fares had to be designed to stimulate passenger traffic. But the point was that loads were
Chapter 23 ~ Pacific Divison ~ 163
already full so I did not understand why the commissions were so high. It was explained to me that the street fares were what the travelling public expected to pay rather than the price that the airlines needed to set to stay alive. It became clear to me that neither Cathay nor CP Air were making any money carrying these loads across the Pacific. [If memory serves, economy return fares were about $800. A quick back-of-theenvelope calculation would show that operating a DC10 at $10,000 an hour for 12 hours each way would cost $120,000. Divide that by 300 seats would mean it cost $400 per seat each way. Unless we could find a way to improve this street fare there was not much hope for profitability on this route. I took a brave step and one which I did not consult with head office before hand. I contacted Linus Cheung, the Commercial & Marketing Director at Cathay Pacific headquarters in Hong Kong and asked him to meet me for breakfast. It was a very pleasant meeting and a surprise because we had known each other in our younger days in Hong Kong and Linus was a fan of the Kontinentals, the band that I used to play in. I came to the point at the meeting and revisited the back of the envelope calculation with him. He said to me “I thought you people already knew this was an unprofitable way to price the fares,” whereupon I explained to him that my job would be to change that thinking. We left without any explicit agreement but not long afterwards Cathay’s street fares went up $50 which allowed us to move our prices up. Over the next eighteen months those street fares had improved enough for
164 ~ Keith Pope
the bottom line to show positive on the Hong Kong route. One of my new friends from the PWA merger was Keith Pope, a conscientious and presentable type of man. He was introduced to me bymy boss, Jack Miles, Senior VP International, on the occasion when he announced that Keith Pope would be working for me as General Manager Australia. And, oh yes, he will be going there next week to replace Ralph Sharp who has been there for more than ten years and will be retiring. I must admit that in those days thin skins did not serve a CP guy very well and so I accepted the imposition with a resolve to give Keith the benefit of the doubt. I was more than pleasantly surprised. Keith turned out to be a strong manager, quick to learn and easy to deal with. His people skills won over the Australian personnel quickly and the transition to his stewardship was smooth and painless. Keith’s wife Barbara worked tirelessly to settle them in their beachfront bungalow in Watson’s Bay in Sydney and when I visited Keith some months later I was as much impressed by his frugal choice of accommodation as I was by his quick grasp of international aviation diplomacy and protocols. He had presented himself to the Canadian Consular people and was already well plugged-in to the Qantas mob whose backyard we were playing in. Keith made his biggest impression when we had a regional GM meeting in Thailand shortly after his appointment. The majority of the GM’s in the Pacific division were still ex CP guys and Keith was the newcomer. He arrived in Bangkok with an open and friendly manner about him
Chapter 23 ~ Pacific Divison ~ 165
and by participating in our social gathering (read cigar smoking and scotch drinking), he was quickly accepted by the group. Keith was one of the early and enthusiastic adopters of the “Quality” program that we rolled out in the Pacific division. This was the movement that later propelled itself across the entire airline and I suspect that Keith had a hand in leading me away from paradise to be promoted to the job of Senior Vice President, Customer Service, responsible for global customer service operations. On one of my trips to Australia I took my young son Mark with me and we visited the World’s Fair in Brisbane. On the day we left for home, Keith’s wife Barbara sent along a food package of peanut butter and jelly sandwiches for Mark. Apparently he had complained about the “black fish eggs” and raw salmon on the flights. Mark still talks about Barbara fondly today. Keith became a Vice President later on in his career at CAIL but that was towards the tail end of its existence. When I arrived on the scene, Roy Fullerton, the General Manager of Hawaii, was one of the most colorful old timers of CP Air. The best way to describe Roy is to say that he was a walking smiley face icon. It seemed like he had a permanent smile on his face. When there was trouble he was as unflappable a guy as you’d want to be with. Roy’s wife, Verna, was and is probably my favorite of all the ladies I have met in my life. She was not only a gracious hostess and a real pretty one at
166 ~ David Solloway
that, but she was kind and genuinely sweet. Even to this day Verna remembers my birthday and sends emails to apologize for not being able to bake me a chocolate cake! Roy’s career involved many moves to bases in Canada and the US west coast. He was infamous for his claims on moving expenses. Under household items he included such bizarre items as cedar siding and lumber. When I was in corporate accounting I used to query these claims and his explanations were always rational. He was a constant home improvement guy. One day while on a visit to Honolulu Roy invited me over for dinner at his house (he had chosen to buy the house to refurbish and receive a rent subsidy instead of making the company pay for a rental house). When I arrived I found out that they had had a catastrophe with the cement truck a few weeks earlier. Apparently they were building a pool in their backyard which was situated on the side of a hill with a fairly steep grade. The cement truck that was parked on their driveway slipped out of park and crashed into their bedroom! Things worked out though because we were swimming in the pool overlooking the bay after dinner that night! With Roy’s help I arranged for the first ever meeting of the GM’s with their spouses included in the program. I wanted to make sure that the spouses knew we appreciated their support for the times the GM’s were required to be away from home. Roy wrangled a cheap dinner cruise on a big old junk and we had hula dancing and lots of fun. A great start to the new era of the Pacific Division. Roy and Verna retired from the airline and are
Chapter 23 ~ Pacific Divison ~ 167
still smitten by the wanderlust. They live in Surprise, Arizona in the winters and traverse North America in their mobile home the rest of the year. They touch down in Vancouver most summers and we get together for a visit. David Solloway, a tall, rangy character with his sights always set on the next bigger and better thing in his career had been newly appointed to Thailand in preparation for CAIL’s service extension from Hong Kong. Dave brought with him a professional and academic approach to the business. He applied a marketing-oriented macro/micro analysis technique to the travel business and this was a change from the usual quota driven sales world. When I first arrived for a visit I found his briefing book for Thailand so good that I asked his permission to adopt the format for briefing books on the rest of the Pacific countries. David left CAIL sometime after successfully introducing CAIL service to Thailand in October, 1987. He joined United Airlines in Hong Kong and later moved to India as General Manager for that country. Dave would eventually return to Vancouver with his Thai wife and child and he was appointed General Manager, Canada, for Oasis Hong Kong Airlines, the highly popular low cost airline. Sadly Oasis was to last just over a year and went under in July 2008. Solloway introduced an Indian travel agent to me in 1987 at a
168 ~ Willy Thorogood
meeting in Bangkok. The agent was bidding for CAIL’s India General Sales Agency (GSA) which was being tendered for competition. Rahul Bhatia of Interglobe India came to make a presentation (one of many we looked at that day), and he blew me away. This was the first time I had seen an Asian agent make a presentation using colored overhead foils and six overheads. I found out that Mr. Bhatia, who appeared to be in his twenties, was a graduate of the University of Waterloo with a degree in electrical engineering. He had recently returned to India to join his father’s company. Interglobe was hired on the spot and the production out of India increased immediately after their appointment. Sometime later Rahul contacted me to ask if CP Air would serve as a reference for his firm in his bid to win the United Airlines’ India GSA. I was very happy to provide an introduction to the Senior VP of United Airlines for that region and soon after that Interglobe was appointed the UAL GSA. Rahul’s company would go on to win the contract to start up an Indian operation to run United’s Galileo system. This young man went from strength to strength and in 2007 launched the highly successful no-frills domestic Indian airline known as Indigo Airways. He made international news with the announcement of the purchase of 100 “airbus 320” aircraft at the Paris Air show in June 2005. Today Rahul’s company, Interglobe Enterprises, is an Indian conglomerate involved in developing and operating hotels, airport infrastructure, commercial aviation and related IT businesses. Rahul Bhatia still fondly remembers
Chapter 23 ~ Pacific Divison ~ 169
his company’s humble beginnings with CAIL and remains a good friend of mine today. Willy Thorogood was a legend in her own time. She was a tall, statuesque woman with a large mass of hair and a shock of ash blond running up from her widow’s peak. I first met her in 1969 shortly after I joined the airline. An American, she had hired on in Vancouver and she began a career in the service side of CP Air. Off and on over the years Willy and I had crossed paths and in 1988 she came to see me for the position of Manager, Shanghai. The position included responsibility for airport operations as well as the setting up of the commercial/sales operation in the city. She was astute enough to point out that she was single and did not need fancy quarters or much hand-holding. This strengthened her case in comparison with the challenge we would have of moving a Canadian family over to China. In those days suitable accommodation was impossible to find and living standards were inadequate for children. I was very dubious about the reception a woman might receive from the Chinese local staff but, in keeping with my philosophy of giving people the benefit of the doubt, I gave her the nod. I was not disappointed by the decision as Willy was able to not only take charge at the airport in Shanghai but she also set up the sales operation in the city. She later moved to Beijing to supervise the incoming preparations for service to that city in the fall of 1988. Sadly, it all came to an end in the summer of 1989 in the wake of the Tianamen square incident when all western
170 ~ Larry Nelson
carriers suspended services. CAIL did not return to Beijing until many years later. In 1990 Willy was transferred shortly after that to Fiji to replace Mike Waters as GM and she remained there until retiring and coming back to Canada. She made many close friends in China and still keeps in contact with them. Willy is an active participant in the Pionairs Association – the retiree association for retired airline employees. Larry Nelson was the Director of Marketing for the Pacific division and he was a surviving CP guy who made the transition to CAIL. A hard worker and always ready to pitch in and give an opinion, Larry understood what I was trying to do in the Pacific division. He knew I was attempting to steer the culture towards one that embraced service excellence and the value of customer loyalty and he enthusiastically got involved when I launched the Pacific Excellence program. This program was going to be the backbone of a CAIL turnaround and would be based on the belief that quality costs less and that the cost of non quality was the root of all business failure. Larry was a champion of this philosophy and he went about establishing quality teams at each base. I empowered those teams to make local decisions to improve customer service. I believe I went so far as to say that provided they don’t change the name and the color of the airplane they could change everything else. This produced a massive number of low cost procedure changes which so liberated the local teams that soon they began to share -
Chapter 23 ~ Pacific Divison ~ 171
willingly - their success stories and methods with other bases in the region. Larry knew that I had his back covered and attacked the task with gusto. He became almost evangelical about the Quality movement and I will never forget his support during that time. Years later, I tracked Larry down when I was CFO at the Workers Compensation Board of British Columbia and hired him. He has since retired having held the position of Risk Manager in the Risk Management department, a highly sophisticated business analytics function. I loved working in the field. It was not unusual for me to turn up at Nandi airport in the early morning to meet the transit arrival of the Honolulu-Sydney flight or to go to the Hong Kong airport in the middle of a summer day to work on the ramp alongside the line maintenance crew. Once I ran into Peter Sutch, (the Managing Director or CEO equivalent of Cathay Pacific) at midnight on the tarmac at Don Muang airport in Bangkok. He too was doing his walkabout. After exchanging views on the benefits of turning up to observe frontline operations in person we became fast friends. Among my memorable experiences was what happened one evening about 5 p.m. when I arrived in Shanghai on a flight from Vancouver. I went on the tarmac to observe the unloading of baggage from the hold (We had contracted CAAC to do our ground handling). To my consternation, I observed all the ground crew squatting against a fence eating their dinner. I was told that they were not
172 ~ Fiji
going to unload the aircraft for a while. Willy Thorogood and I along with our own ground staff began to unload the baggage ourselves (our passengers were waiting for their luggage inside in a non air-conditioned room). Afterwards, to add insult to injury, the CAAC cleaners who were there to clean and groom the aircraft walked away with all the blankets and magazines. You live and learn in this world when you go around with your eyes open! There are numerous people and stories that will remain fond memories of my time in the Pacific division and I want to say to them wherever they are that I and the company, even today’s Air Canada owe them a great deal for their efforts and dedication to Canadian aviation.
Chapter 24 ~ Despite Colonel Rabuka’s coup – we kept our flights going into Fiji!
On May 14, 1987 I was awakened at home in the wee morning hours by our SOCC center advising that there had been a military coup in Fiji and that our aircraft had left Honolulu and was enroute to Nadi airport. SOCC wanted to know whether they should divert the flight and bypass Fiji or continue as planned. I shook the cobwebs from my head for a second and asked “Was there violence and is there a threat of violence at the airport?” When the answer came back “No” I asked the next question: “Are other airlines going in?” and the answer was, “Not sure, but probably not.” After thinking for a minute, I gave my response to proceed and land and operate as scheduled. I was asked by my boss the next day why I made that decision and I simply said this “We had customers on the flight destined for Fiji and we had people boarding the flight from Fiji to Sydney. To disrupt their travel when there was no threat of violence would be unnecessary. Oh, and by the way, we can make more money now if other airlines don’t provide service.” The
174 ~ Terry Francis
immediate political aftermath of the coup was condemnation by the United States, the United Kingdom, Australia and New Zealand, all of whose carriers stopped service to Fiji. Meanwhile our DC10 continued to stop over to pick up and drop off passengers and freight. We sent our own corporate security people to Fiji to beef up security and life went on without a hitch. At no time were our offices or operations at risk because we were the only life line for the Fijian people and Colonel Rabuka’s republic did not object to the out migration of non-indigenous Fijians. I dropped in frequently on Fiji in those days and got to meet the Secretary of Transport several times. He asked me if I would help him with a plan to repatriate control of Air Pacific, (Fiji’s national airline) from Qantas from whom the Air Pacific B747’s were leased and from whom their CEO was seconded. In effect the government of Fiji was impatient to come out from under the control of Qantas, but they could not go it alone. Would CAIL, therefore, be a potential partner to Fiji? I returned to Vancouver and conferred with Terry Francis, Executive Vice President Marketing to whom my boss, the Senior VP of International, reported. Terry, otherwise known as “Ubergruppenfuhrer” thought it was an interesting angle and gave me the go ahead to engage with the Secretary of Transport. I prepared a long term strategic plan for Air Pacific that would see them take full control of Air Pacific within five years. The plan included training for them to become technologically and technically self sustaining. My plan was received so well by the
175
ABOVE: 1962 The original ‘Kontinentals’ BELOW: 1968 ‘The Five Man Cargo’
176 ~ Norfolk Broads Gang
ABOVE: 1979 Brent Statton, Ken Dakin and my brother Sammy Fattedad BELOW: 1981 Norfolk Broads Boat Crew
177
ABOVE: 1982 Norfolk Broads gang BELOW: 1970s Me with Abel Swaak (Amsterdam) and Nick Vrailis (Athens)
178 ~ Senior Executive Committee of Canadian Pacific Airlines
ABOVE: The Senior Executive Committee of Canadian Pacific Airlines before the PWA takeover. (Left to right) Unknown, Gerry Manning, Peter Barker, John Bidlake, Unknown, Sheldon Stoilen, Dan Cotter,
179
Kurt Peiffer, Don Carty, Paul Nelson, John Pastuzynski, Ted Shetzen, Dave Murphy, Brent Statton, Bob Weatherley, Roy Sturgess (the General), Barry Duggan, Sid Fattedad, George Heinmiller
180 ~ Colonel Rabuka
ABOVE: 1987 Keith & Barbara Pope, Jack & Helen Major and Rhys & Lynn Eyton BELOW: 1985 Air Naru Boeing 737 in Vancouver
181
ABOVE: 1987 Colonel Rabuka with Jack Major, Rhys Eyton and me BELOW: 1987 David Solloway with Mrs. Eyton in Bangkok
182 ~ Rhys Eyton and Jack Major
ABOVE: September 12, 1988, Keith & Barbara Pope on board ‘ Jantha,’ Sydney Harbour BELOW: 1991, Terry Francis and myself after picking up our B747-400 in Everett, Wa.
183
ABOVE: Willy Thorogood in Shanghai BELOW: 1987, Rhys Eyton and Jack Major in our Hong Kong office
184 ~ 1987 Pacific Division Workshop
ABOVE: 1987 Pacific Division Workshop, Keith Pope, Harry Hargadon, Roy Fullerton, Warwick Beadle, Ian Becket, Jack Miles, Dave Solloway, Larry Nelson BELOW: 1987, Directors of Air Pacific in Melbourne
185
RIGHT: 1993 (Spring), As seen in a Portraits article, (Portraits is published by the Certified General Accountants Ass. of Canada) CGA becomes corporate saviour.
BELOW: December 1993, Me receiving the Canada 125 award and a framed photo of myself beside our airplane The Spirit of Canadian.
186 ~ Prime Minister Joe Clark
RIGHT: 1993, Vancouver Marching with employees to save the airline
BELOW: Me with Prime Minister Joe Clark in Bangkok, Thailand
187
LEFT: 1993 Prime Minister to be Jean Chretien addressing employees at a rally at YVR ops centre
BELOW: 1990 Prime Minister Joe Clark with David Solloway in Bangkok, Thailand
188 ~ The old CP Finance Gang
ABOVE: 1993, Me with Bill Farrall BELOW: 1994, Me receiving the CGA, John Leslie award, Charlottetown for my work on behalf of CP
189
ABOVE: The old CP finance gang, Sheldon Stoilen, Cy O’Brien, Dave Murphy, Jack Crawford and myself (December 2000) BELOW: The Last CAI logo
190 ~ The Spirit of Canadian
LEFT: 2005 Me returning to Vancouver from Victoria when I was Chairman of BCIMC (British Columbia Investment Management Corporation)
BELOW: DC-10 aircraft, The Spirit of Canadian with names of employee shareholders painted on it after the successful employee share ownership deal was closed (1994)
191
Secretary that he proposed to appoint me to the Board of Air Pacific. I was given the OK by Terry Francis and served for the next two and half years on the Board of Air Pacific. I had to resign from that Board when I was promoted later in 1989 to a Senior Vice President role at CAIL.
192 ~ Dave Solloway
Chapter 25 ~ Reader’s Digest, Black Monday, Whale tooth and Glenfiddich on the beach with the future Supreme Court Justice
In the summer of 1987, less than a year after being appointed VP of the Pacific Division, I received a call from Eyton’s Executive Assistant: “Mr. Eyton would like you to prepare an itinerary and a program for Mr. & Mrs. Eyton and Mr. & Mrs. Jack Major (one of the senior PWA board members) to travel to the Pacific region for a familiarization tour. The duration of the trip may be upwards of three weeks towards the end of September and beginning of October – oh, and you should accompany them to all the countries.” How on earth does one prepare for something like that? Rhys was taking his acquisition of CP Air seriously and wanted to see for himself first hand what made the Pacific division the most profitable area for the company. I was also advised to beware that Mrs. Eyton and Mrs. Major would attend site visits and functions. The template that Dave Solloway created for a country overview and business synopsis was pressed into service and every GM in the Pacific
194 ~ Willy Thorogood
region sent in a professional dossier that was top notch briefing material for Eyton and Majors. These dossiers were provided to them weeks in advance of their departure to provide ample time for reading. Their itinerary was spread over three weeks and had them visiting Tokyo, Shanghai, Hong Kong, Bangkok, Sydney, Auckland, Nadi and Suva, and finally Honolulu. In Tokyo we visited the airport cargo and passenger operations and Eyton showed great interest in the cargo container shipping and distribution operation at Narita. We also met with Ambassador Barry Spears at the embassy and Rhys and Jack Major must have made a mental note that he would be a good candidate for the potential board member recruitment list. The visit of course included the usual courtesy meetings with senior executives of Japan Airlines as well as officials of the Japan Civil Aviation Bureau. It was in Tokyo that I noted an effective habit of Eyton’s – he always had a bundle of small note cards which he would bring out and take copious notes in his impeccable handwriting. He would follow up on each of the “to do’s” and impressed everyone he met with follow up comments and responses. We moved on from Tokyo to Shanghai without Mrs. Eyton and Mrs. Major who travelled ahead to meet us in Hong Kong! Shanghai in 1987 was a city being reborn. In other words it was a mess: broken
Chapter 25 ~ Glenfiddich on the Beach ~ 195
pavements, dilapidated housing, millions of bicycles competing with the few Toyota taxis and broken-down lorries overloaded with building materials and other goods. We arrived at the old Shanghai airport and were met by Willy Thorogood who had booked us into the brand new Sheraton Hotel, one of the very few international standard hotels in Shanghai at the time. Of course Willy had made sure we did not go through the usual check-in process and Rhys was led to the penthouse Presidential suite which had apparently just been vacated that morning by Patti Reagan Davis, the daughter of President Ronald Reagan. You can imagine the palatial quarters! Jack and I had arranged to go up to the penthouse to check out Rhys’ quarters. When we arrived the double doors to the penthouse floor were wide open and they led into a large entry hallway with black marble flooring. We called out to Rhys but there was no answer as Rhys had moved his bags into the furthest and smallest of the three bedrooms and could not hear us! When I asked him why he wasn’t in the master bedroom he shrugged and said, “It is more comfortable here!” Rhys always flew economy on his own airline. His modest ways had a way of growing on you and he began growing on me then. The visit to Shanghai was short but instructive and I think it gave Eyton and Major a favorable impression of China’s potential. It might have been during this trip that they first got the idea of expanding to Beijing, which they eventually did on October 28th, 1987, when CAIL inaugurated its service to Beijing. This was some fourteen and half
196 ~ Keith and Barbara Pope
years after being awarded the right to service China’s capital city. It was a warm October night in Hong Kong and the place was magic. The air was balmy and the lights of the city glittered in welcome. Harry Hargadon was on hand at Kai Tak to receive the visiting VIP’s. I did not accompany them in their limousine to the Hilton hotel because I was taking the opportunity to visit my parents and staying with them. I met the group at the Canadian Airlines offices at Swire House the next morning where Harry introduced the staff and provided a familiarization briefing. The briefing books had done their job and both Rhys and Jack were well informed ahead of time so that they were able to ask productive questions and engage in useful dialogue. A highlight of the Hong Kong visit was the arrangement by Hargadon to host a reception
Chapter 25 ~ Glenfiddich on the Beach ~ 197
for the Hong Kong business elite which included the likes of Li Ka Shing. I recall at that meeting there was some euphoria over the recent year’s stock market gains but there was also some fear that there was too much optimism about the market. Interest rates were rising. There was discussion about the possibility of a PWA listing on the Hong Kong stock exchange so it was agreed that we would follow up on that possibility. Next stop Bangkok.We spent a few days in Bangkok (a hive of activity) in preparation for CAIL’s inaugural service later in the month. In addition to the now familiar consular visits, receptions for the local business elite and staff meetings, the Eyton’s and Major’s witnessed the ceremonial blessing of the CAIL offices by Buddhist monks. My impression was that the VIP’s were beginning to form a much better picture of the breadth of cultures and economic diversity of Asia. Our next stop was Sydney, Australia where Rhys was warmly greeted by Keith and Barbara Pope who had settled into their new environment only months earlier. Rhys was reminded by the Australia staff, especially by base accountant, Maree Graves that Australia was one of the first international destinations of CP Air and should hold a special place in the hearts of the new owners. Maree was never a shy one!
198 ~ Colonel Rabuka
On October 18, 1987, we flew to Auckland, New Zealand where we visited our sales offices. This was to be a very traumatic time for Rhys and the world. On the morning of October 19, 1987, (later to become known as Black Monday), the world’s stock markets crashed. Beginning in Auckland, Sydney and Hong Kong, then spreading to the rest of the world, stock markets lost upwards of 50% of their value. No one seemed to be able to pinpoint at the time why this was occurring. I was having breakfast in the Regent hotel in Auckland when Rhys came into the restaurant with a shocked look on his face. I did not realize what had transpired until he said, “PWA stock has plunged!” He nevertheless carried on the day’s prearranged meetings and conducted himself with a calm exterior that belied what must have been hell for a CEO to go through. Strange as the Black Monday event was, markets in 1987 closed at the end of the year slightly up from the beginning of the year. Next destination: Nadi, Fiji. We continued operations into the country following the coup in May, 1987, and the republic’s president, Colonel Rabuka, extended an invitation to Eyton and the visiting party to meet him at the army camp in Suva. He wanted to thank the airline for its commitment to the people of Fiji. It was a pleasant meeting and I was very surprised by the big bear hug that Rabuka’s personal bodyguard gave me when we showed up at the camp. It turned out he was an army corporal with whom I had imbibed the ceremonial drink of Kava back
Chapter 25 ~ Glenfiddich on the Beach ~ 199
in 1974 when I went to Suva to open CP Air’s ticket office. Thirteen years later he recognized me! Later, after we returned to Nadi and our hotel on the beach we were treated to a ceremonial fire-walk by the local Fijian chief. Rhys was presented with a specially set whale tooth along with a special government export permit as a token of appreciation of the Fijian people. It was nearing the end of a grueling two weeks of non-stop travel and we decided after the ceremonial feast to take a walk on the beach after midnight. Jack Major and I struck up a close relationship during the trip by sharing stories of our childhood. It seems as youths we shared a common interest in reading every issue of Readers Digest and especially the humour in uniform section. We took along a bottle of Glenfiddich on our walk and sat down on the sand to look at the stars. It was well into the early morning hours when we retired to our rooms. I had no idea at the time that Jack Major would become a Supreme Court Judge of Canada but I was reminded that I had had a similar night of Glenfiddich some years before on the Island of Sicily. What goes around comes around I thought.....Joss [1]. We finished the Pacific odyssey in Honolulu with Roy Fullerton. I had to hurry back to Vancouver to repack my bags and fly back to Bangkok a few days later to attend the ceremonies marking the arrival
200 ~ Captain Jim Forbes
of the inaugural flight of CP7 from Canada via Hong Kong. I had grown to know and like Rhys and Lynn Eyton as well as Jack and Helene Major over the past several weeks of high velocity itinerary and living out of suitcases. We had shared some memorable experiences together and I felt that we had become friends. I now had a much better perspective and understanding as to why Rhys commanded such loyalty and a strong following from the people at PWA.
Chapter 26 ~ Bangkok inaugural, “the Sheriff”of Patpong and Loy Krathong festival
In my opinion the inaugural ceremonies at Bangkok’s Don Muang Airport on October 27, 1987 set the standard for all inaugural flights. The Thai Minister of Transport was on hand to welcome the aircraft which arrived just before midnight local time. Captain Ken Kaplan and the crew of CP7 were greeted with beautiful flower leis and much fanfare. Captain Kaplan was a mustachioed figure, all of five foot six inches tall, full of mirth and always ready to do whatever it took to complete a mission. The flight departed from Hong Kong to Bangkok on time despite arriving at Hong Kong more than an hour late from Vancouver. Captain Kaplan and his crew knew the importance of getting the inaugural flight to Bangkok on time and pulled all the stops to have the plane serviced, fueled and catered in Hong Kong by doing a record-setting 40 minute turnaround. Captain Kaplan’s colorful career with CP Air and Canadian Airlines includes a story which is particularly hair-raising. He was piloting a DC8 to Honolulu in 1972 with Captain Jim Forbes and
202 ~ Captain Dennis Currie
the aircraft was four and half hours out over the Pacific when they had to abort the flight and return to Vancouver. The return to Vancouver took just over an hour! Ken Kaplan still resides in Tsawwassen, near Vancouver, and I consider him to be one of the great characters of the airline. Our local Thai national key man was a gentleman by the name of Manob Song-Im. He was our head operating representative. It is still common n business practice in Asia for a foreign company to rely on a local agent (“a comprador”) as the go-between in dealing with local staff and bureaucracies. Manob was the “go to guy” for Dave Solloway in our case and he did a terrific job while remaining inconspicuous. It was not until one got to know Manob that one discovered his more colorful side. Larry Nelson and Dave Solloway had arranged to invite VIP’s from Canada on the flight. Included on the guest list of media people, travel agents, industry writers etc., were two of my very good friends: Ted DuFresne, a valued frequent flyer, and Captain Dennis Currie, a PWA B737 pilot who was now in the CAIL family. I invited Dennis for two reasons. First, I felt that as a PWA pilot he would realize that by inviting him I was showing that there was no blue/orange color barrier and as a result he might communicate that back to his PWA colleagues thus helping to ease the naturally strained post-merger relationship between the pilots
Chapter 26 ~ Bangkok Inaugural ~ 203
of CP and PWA. Secondly, Dennis was a good personal friend whom I had known since 1981 when we lived in the same neighbourhood in Tsawwassen and used to go to their beach house in Point Roberts on the Boundary Bay side. Ted DuFresne was also a Tsawwassen-ite so it was an opportunity to have some fun. I was looking forward to it after the previous three grueling weeks of escorting Rhys Eyton and Jack Major around the Pacific Rim! Dennis and Ted arrived on the inaugural flight after 18 hours of travel. They were wired but ready to go! The invited VIP’s were put up at the Regent Hotel in Bangkok (it is now the Four Seasons Hotel) at 155 Rajadamri Road. Ted and Dennis were guests of the airline for the flight but they were required to pay their own accommodation. There was no way that Dave Solloway could have snuck their expenses into his budget without my knowing about it! The inaugural ceremonies were not a cake walk. Not only were we at the airport til past midnight, we also had to go back out there the next morning to celebrate the inaugural outbound flight from Thailand. The festivities took a few days and during these few days Dennis and Ted went off on their own to explore Thailand, returning days later quite giddy from their experiences in Pataya.
204 ~ “Sheriff of Patpong”
They came back in time for the celebration of the festival of Loy Krathong. It is held on the full moon of the twelfth month of the Thai lunar calendar which falls generally at the end of October or beginning of November in the western calendar. The festival is among the most colorful and romantic of festivals in Thailand. “Loy Krathong” means literally floating raft and on the night of the full moon many people will release a small raft, (a handspan in diameter, decorated with flowers, lit candles and incense sticks) onto the Chao Praya river. It is a festival of thanksgiving and the act of releasing the candle raft is symbolic of letting go of all one’s grudges and anger so that one can once again start afresh. Some people also cut their fingernails and hair and add them to the raft as a symbol of letting go of undesirable things. It is also believed that floating a krathong creates good luck. The image of hundreds of thousands of silently floating candles on the river at night is punctuated by the rather loud but more festive practice of setting off fireworks, including rockets fired from the banks of the river. Dave Solloway arranged to treat the visiting Canadian Media personnel to a river cruise and we all went along. There was plenty of room in the long tail boat. Unfortunately the excursion ended when one of those rockets fired from the river bank by an anonymous Thai struck and exploded against one of our guest journalists, cutting short the Loy Krathong river cruise! Manob came to our rescue that evening. After we escorted the
Chapter 26 ~ Bangkok Inaugural ~ 205
journalist back to the hotel and made sure she was medically attended to, Manob suggested we all visit the famous red light district of Bangkok: Patpong. Off we all went in a number of those iconic tuk tuks [5] famous for their flagrant disregard for traffic order, following Manob into the night. Patpong was at once an exhilarating, grimy, intimidating, exotic and fun experience and made more so by Manob who, we discovered, had the nickname of “Sheriff of Patpong”. Doors opened for him wherever we went and he was universally known by the district’s denizens which included exotic dancers, food sellers, police officers, pool hall operators and street hawkers. Manob was a veritable Elliott Ness [6] in Patpong and we were able to thoroughly enjoy our time there without being harassed.
206 ~ The “Quality” program
Chapter 27 ~ The Quality program leads to a promotion and moving to Calgary – a case of glass half full or…..?
Despite the economic crisis of 1987 and the subsequent slow down in 1988, these were very successful years for me personally. I had begun the process of transforming the Pacific division’s performance by implementing a “Quality” program. The “Quality” movement that empowered the front line to deliver the credo “Meeting and exceeding the needs of our customers at a sustainable cost, every day”, gathered momentum. Throughout 1987 and 1988 I tried to impress on my colleagues in head office that if we improved service and quality in the Pacific branch of the airline without making corresponding changes in head office philosophy and processes the experiment would be doomed. I set about engaging with the senior management at all the central control divisions (marketing, catering, operations and maintenance etc.) to win them over to the “Quality” movement. It really was just a back-to-basics doing-itright-the-first-time approach to things, except the primary focus was on what is right for the customer. An example of how we implemented
208 ~ Kevin Jenkins
change was to foster good communications between flight attendants and maintenance personnal, explaining the havoc created for in-flight services when airplanes are dispatched with faulty reading lights and inoperative entertainment systems. One of my pet peeves was the frequency with which toilets plugged up on long haul flights because of inadequate attention to the “honey wagon” servicing part of the business. I was able to relay to Chris Nassenstein, the VP of Maintenance, my experience putting on vinyl gloves and using empty wine bottles to unplug DC10 toilets on a flight to Hong Kong. He was impressed. Most of the people in head office had concluded, falsely, that the washroom problem stemmed from the staff’s aversion to pakistan roach coaches aka DC10’s. In 1989, the wheels began to come off the wagon for CAIL and Wardair as month after month revenues and earnings fell far short of the plan. Murray Sigler, the President of CAIL, was under severe pressure and finally in the fall of 1989 Wardair and CAIL was merged and with that merger Murray Sigler lost his leadership role as President and Kevin Jenkins took over in his place. Implied in the merger capitulation (remember that Eyton and Jenkins announced that they would run Wardair independently) was the inevitable downsizing. Sigler’s ouster was not the preferred solution of virtually the whole officer corps because Murray was well liked and people were skittish about Jenkins.
Chapter 27 ~ The Quality Program ~ 209
The reorganization that ensued was a grim time: A Calgary hotel was booked for several days and every company officer had to meet with Rhys Eyton at a specific time to find out his/her fate. There were frantic phone calls from vice presidents to each other to find out when they were scheduled and the guessing game was on. Some felt that to be called in early meant you had a job while others felt that the later you were called in the better your chances were. I remember wondering myself why I would be scheduled late on the last day. I walked into the suite at the Westin Hotel in Calgary to be greeted by Rhys and Jenkins both smiling at me. A good sign. Jenkins said “Congratulations Sid. We have put you into the leadership role for Customer Service worldwide as the Senior Vice President. You will be responsible for airport operations, in-flight services and reservations worldwide”. This meant that I was promoted to a headquarters job and would need to move to Calgary, he said. Rhys, who knew that my son Scott has Down syndrome, added that the company would do its best to see that Scott’s educational needs were looked after. Then I asked a rather innocent question and its answer jangled my nerves: “Who would be taking over the Pacific division?” The answer was, “We can’t tell you now but you will find out in due time.” I was being appointed to one of the top three positions of the company and I could not be trusted with information about who would take over my old job? It left a bad taste
210 ~ Bev Hewitt
in my mouth as I left the hotel to take the six p.m. flight back to Vancouver. Obviously I had an interest in who was taking over from me in the Pacific Division as I had grown close to the people there. Change was inevitable during leadership shuffles and I wanted some idea as to who would lead these people. As it turned out Ted Ranson was appointed to take over my position. Ted had come from PWA and had a good track record as a people person. To his credit Ted continued to nurture the Quality movement that had started in the Pacific division and my worries proved unfounded. It was late in the fall of 1989 but I took my family to Calgary several times to go house and school hunting. It became very apparent to us that leaving Vancouver and an extensive support structure for our son Scott was not going to work well for his future well being. The most significant obstacle was the lack of integrated schooling for him which we had in British Columbia. I should also be genuine by stating that I had my personal doubts about my future at the airline. I did not agree philosophically with Jenkins about the level of debt that the company had taken on and I thought his leadership skills were suspect. After all, he was not much past thirty and I had had a run in with him over the tax consequences of the CP Hotel transaction before PWA purchased the airline.
Chapter 27 ~ The Quality Program ~ 211
So we decided that I would commute to Calgary Monday to Friday and go home for weekends. The odd thing was that most of my time was then spent on the road travelling during the week from Calgary to Toronto and Vancouver where airport operations and in-flight services were based. The rationale for having me in Calgary was that the Senior Team would be in close proximity and could work better as a team. Much to my disappointment the only person I ever had any regular contact with was Terry Francis, the Senior Vice President of Marketing. In fact, in the year and half that I lived in Calgary’s Palliser Hotel, I had only one invitation and that was to dinner at Dave Murphy’s home (he was former CP Air Treasurer and the Senior Vice President and Treasurer of CAIL). Terry Francis and I would occasionally go out for dinner after work but overall it was a dismal time for me, especially in winter when it gets dark at 4 p.m. and the three block walk back to the Palliser Hotel along Stevens Avenue Mall, (deserted by 6 p.m.) is inhabited only by the hardiest of late workers and drunks. A very interesting thing happened during this time. Early one morning I was paid a visit by a highly energetic and keen young lady by the name of Bev Hewitt (later Bev Behan) who was either a lawyer completing her MBA or the other way around. She was interested in observing the Quality movement that I had started in the company’s Pacific division and which I was rolling out to the rest of the company.
212 ~ Bev Hewitt
Bev had been sent by Kevin Jenkins who asked if I minded if she just camped herself in an office nearby? Of course not, I said, wondering what Jenkins was up to. I decided that confronting him on his motives would not help Bev’s research and I resolved to include her fully into my operation and gave her full exposure to the Quality movement. Bev was a quick learner and soon absorbed the nuances as well as the practicalities of how to implement a quality system. She became head of the Customer Service Complaints department where she would gain incisive insights into the types and root causes of service failures. She would also learn a great deal about managing customer expectations. Giving Bev free access to the quality program and cultivating a respectful and open relationship with her would prove later to be one of the most useful and positive steps I ever took for the benefit of CAIL and its survival. The period from 1990 through 1992 were challenging times for me both professionally and personally. I knew that accepting the job of Senior Vice President of Customer Services worldwide was more a strategic role than an operating role. In a strategic role it is critical that there is a clear strategic plan with agreed upon objectives and full co-operation of those responsible for achieving strategic objectives. During this time, however, the airline was practicing “drive-by strategic planning” as it reacted from crisis to crisis. Kevin Jenkins, who became President of the merged airline that included the big three groups [PWA, CP Air
Chapter 27 ~ The Quality Program ~ 213
and Wardair], once held cost-cutting meetings that went on well past midnight with more than twenty vice presidents in the board room at the Scotia Centre offices in Calgary. My portfolio, which included airport operations, catering and in-flight services and reservations were also major cost centres. The old adage in cost management goes something like this: all costs are variable in the long term but fixed in the short term. The biggest problem with all established or legacy airlines was that they tended to perform most functions with their own staff. Over time this led to a high degree of collective bargaining and embedded rights and benefits. So in times of sudden drops in revenues or rises in costs as a result of events beyond anyone’s control (i.e. recessions and oil price spikes), the company’s costs are, by and large, fixed. It is inevitable that in bad times when cost-cutting exercises are put in place, the most unproductive time is spent nickel and diming the small stuff. We got into such things as how much we could save by cutting out magazine subscriptions when we knew that the only way to save the airline was to stop waste and unproductive practices and if we did that we could trim down on staff.. The problem was that there was no time and no internal capacity to carry out business process re-engineering on a widespread basis so we had to resort to blunt instruments: slash the workforce, cut service and product content (meals, passenger amenities etc.) as best we could and without often a clear understanding of the consequences. I quipped once that we might start by looking around and note
214 ~ Chris Patton, the Governor of Hong Kong
how many Vice Presidents were in the room but that was not well received. It all ended not well for me as I became more and more disenchanted with the airline’s lack of strategic direction and it came to pass in late 1990 that I had a heart to heart talk with Rhys Eyton to say that I thought I should leave the company. Rhys did not want me to do that and asked me to take a position in Vancouver as the senior officer in British Columbia and so I moved back to Vancouver as the Vice President Western Region in early 1991.
Chapter 28 ~ Prime Minister Mulroney visits the Far East. Pushing our luck at the Peace Arch border crossing
My remaining time at CAIL as an officer and employee was highlighted by two memorable events. The first was my participation in Festival Canada 1991 in Hong Kong where Prime Minister Brian Mulroney presented the people of Hong Kong with a “Killer Whale” Totem Pole as a symbol of the enduring friendship between Canada and Hong Kong. The 31 foot three tone totem was designed and carved by Dale Marie Campbell and her brother Terence, members of the Tahitan Tlingit Nation. I made my father very proud when an invitation from Chris Patton, the governor of Hong Kong arrived at our family home for me to attend a reception and dinner at Government House. My father made our driver buy a new white driver’s uniform and made sure he polished the Mercedes to drive me to the governor’s residence. What a thrill it was for him. Even in his old and frail condition I could see him crane his neck over the balcony of his Estoril Court apartment to watch me being driven away to government house. I often wonder if he was thinking
216 ~ Prime Minister Mulroney
back to the time he drove me to Kai Tak airport when I first left for Canada and I hope he was happy how it all turned out. If only he knew what was yet to come! As the ranking Canadian Airlines officer for the occasion I met and chatted with Prime Minister Mulroney during his trip to Hong Kong and it proved useful at a later date when I met him again in Ottawa under dire circumstances. There is a sequel to the Totem story in 1992. Chris Patton, the last governor of Hong Kong, came to Vancouver and presented Brian Mulroney with a teak dragon boat as a reciprocal gift to Canada in honor of the close cultural and business ties between Canada and Hong Kong. The second memorable event was so humorous that even now I chuckle in recalling it. As an irony that only occurs in the airline world new aircraft orders are placed years in advance of delivery because Boeing just doesn’t “cut” any metal until they have received and stored up a backlog of aircraft orders. So it was that in the middle of an economic downturn in 1991, CAIL was taking delivery of yet another brand new $200 million Boeing 747-400 aircraft, the order having been placed in 1988 when times were relatively good. When the time came to take delivery I had an understanding with Terry Francis, the senior VP of Marketing, that I would go down and pick up the plane with him. Picking it up
Chapter 28 ~ Prime Minister Mulroney ~ 217
meant we would go down to Everett, Washington with a team of pilots and engineers and fly the airplane back to Vancouver airport. We rented a perimeter transportation bus and everyone met at the operations centre at the appointed time for the drive down. Since there were not going to be any formalities we all agreed we would dress casually i.e. no suits and ties. No one looked like he was in any way involved with an airline. Now you have to realize that Terry Francis is a large, bald-headed ethnic South Asian from Uganda and I am from Hong Kong and when we turned up at the border crossing at Blaine, Washington, the US border customs man came on the bus and cheerfully said “Well, where are we going today, folks?” - I simply could not help myself and I said “We’re coming down to pick up an airplane,” to which the border officer said “Oh? And what airplane might that be?” and I answered “A Boeing 747400.” The look of consternation and disbelief that appeared on his face was replaced by a rising redness that could only spell “anger”. He said something like “So you think you’re funny? Let’s everyone get off this bus and come inside, shall we?” Well, Terry and I laughed all the way down Interstate 5 to Everett after they let us go 45 minutes later. Our story was checked out.
218 ~ Terry Francis
Chapter 29 ~ Leaving Canadian
It was inevitable that I would leave CAIL and in mid 1991 when rumour had it that there would be another round of staff cuts, I made it known to Terry Francis that I would be happy to be among those to leave. After Labour Day 1991 he called me to say that the fix was in and when would I like to go. I said February, 1992 would be fine and that was that. It was a shock to many people at CAIL, especially those who had been at CP Air. Many PWA and Nordair people also expressed regret at my decision to retire. I was given a big farewell party at the Hotel Vancouver in the Timber Room and the place was filled with friends from all areas of the company. Everyone wished me luck in whatever I was going to do and I told them that I was going to take a lot of time off just to decompress. In fact I had made plans to travel to Europe but I had no idea what I was going to do next.
220 ~ Stephen Khan
I returned to Vancouver after spending some time with the remnants of the Norfolk Broads Boat Cruise Crew in the south of France. We did a canal cruise holiday on the Canal du Midi and afterwards I wandered around Spain for a time, stopping over in Barcelona for the World’s Fair. It was a very useful decompression for me as I was able to shake off a lot of bad feelings about how CAIL had run into trouble with too much debt and too little strategic direction. I came to realize that no one had acted with bad intentions and although Rhys would have made a better decision by keeping Don Carty as the CEO, it was understandable that he would lean towards those who had come to the dance with him, namely, Murray Sigler and Kevin Jenkins. So after a sufficiently cleansing sojourn I returned to Vancouver in late June 1992 and for the next month I settled myself into a lazy summer on the beach at Centennial Parkway in Tsawwassen. Then on July 27, 1992 the world turned upside down.
Chapter 30 ~ Gulf War drives Canadian into the arms of the enemy….. and the saga began!
On the morning of Monday July 27, 1992, at about 7 a.m. my stock broker, Stephen Khan, phoned me to say that my holdings of PWA debentures had fallen something like 40% overnight as a result of the Canadian/AMR deal falling through. You can imagine the taste that left in my mouth! I did not think much more about the matter until later that morning. I was doing my usual mid-summer routine and had settled into my deck chair on the beach two sandbanks out in Tsawwassen and was just reaching for the pre-noon beer to read the Globe and Mail and listen to the portable radio when a news flash was carried on CKNW: “Canadian Airlines President Kevin Jenkins has announced that it has agreed to merger talks with Air Canada.” This was not news to me and I recall thinking,“Wow, Kevin Jenkins was talking like he had AMR in the bag only a short time ago.”
222 ~ Captain Bob Weatherley
My thoughts turned to worrying about the $70,000 PWA debentures that I had. I carried on reading the paper and mused about the whole sordid matter for the rest of the afternoon. As the day wore on an idea began to form in my mind and I thought, “Why not? It’s do-able”. I had always thought that employee ownership would give a company an edge if its employees acted like owners rather than wage earners, particularly if they shared in the pains and gains. I went back to the house (which was just across the street from the beach) and set about doodling on a spreadsheet, trying to figure out just what it would take to save the airline from a merger with Air Canada. I thought about all this without any idea of what I would do about it even if I did come up with a plan but I beavered on and by about midnight, July 27, I hit “enter” and filed the spreadsheet in my computer. Little did I know that Joss [1] was moving its invisible hand as Captain Bob Weatherley got it into his head to call me on Friday, July 31 (my birthday), and say “Hey Sid, this thing is happening again. They’re selling the damn company. Can’t we do something?” Bob was referring of course to the time in November 1986 when we had had a few drinks at the Prince Hotel in Kowloon, Hong Kong, to mourn the sale of CP Air to PWA. Bob was now quite a bit more agitated than in 1986 and he was
Chapter 30 ~ Into the Arms of the Enemy ~ 223
adamant that something needed to be done. I had given the matter a few days thought since making my spreadsheet plan on Monday night and I said to Bob, “Listen, give me 24 hours to polish up a plan that I have. It is an employee ownership plan like the one we discussed back in 1986 but on a much larger scale. But let’s be practical: There is a leadership vacuum out there. Management has already made a decision to go with Air Canada so the only way to garner widespread employee support against the merger is through the co-operating of their unions. Much as I don’t like the sound of it, I must say that I have never seen management move faster than unions when it comes to organizing employee sentiment so let’s find a way to get the union bosses on side.” Bob said, “I agree and I think Captain John Dunlop, the President of CALPA (Canadian Airlines Pilots Association) might just be the man to help. Will you talk to him if I give him your phone number?” I said, “Sure, give me his phone number and I’ll call him. Also, Bob, you have stayed in touch with Don Carty haven’t you? If so, could you get a message to him that we are trying to start up a rescue effort and it would be useful to know if he would be supportive of an employee ownership plan if this thing comes off.” Bob said he would do that and get back to me. The reasons that fueled my conviction about saving the airline from a merger were simply as follows:
224 ~ Air Canada
“A merged airline with a de-facto domestic monopoly and sole designation for all international routes is open season for the poorest management practices to do their mischief without hindrance for a long, long time. In the same vein I also felt that an airline monopoly would result in monopoly unions and that this would lead to non-competitive wages and work rules which would adversely impact the cost equation. Even further the only people who would be hurt by it would be consumers as higher costs and monopoly pricing power drive up fares within a country especially those whose government policy preclude foreign airlines’ entry into Canada. There was also a dark side to the proposed merger that would have hurt the airline workers: massive layoffs. Air Canada had just over 20,000 employees and CAIL over 15,000 and one could easily deduce that at least 10,000 people could lose their jobs while fares would rise as capacity was cut and aircraft were filled to the brim. To be honest, I felt an allegiance to the people of CAIL to at least try and think of a way out of their predicament. In any event it seemed at a cursory glance that between Air Canada and Canadian Airlines they had more than $8 billion of debt and only $6 billion in revenues. Even if they could net 2% on revenues (which would have been considered a wonderful profit), they couldn’t service the debt without a massive debt pay-down with capital they couldn’t attract in current markets. It was always my belief that if they bought more expensive planes with debt as opposed to equity capital the bigger the hole they would dig
Chapter 30 ~ Into the Arms of the Enemy ~ 225
themselves. One of the simple rules of business is that the slimmer your profit margin the more times you have to turn over your assets in order to make money. In my view, a merger of two cripples would have no future. The cure had to come from elsewhere. Furthermore, the net loss before income taxes for the first six months of 1992 for Air Canada and Canadian Airlines was $293 million for AC and $105 million for CAIL. Here was a case of the poor marrying the pauper in the hopes of getting out of debt! I felt that enlightened management along with informed and motivated employees with skin in the game would be a more viable business model for the airline – meaning that the aviation industry’s labour climate of the 80’s and 90’s had to change to one where the manager/employee protagonists would recognize the reality of the airline industry and work to make productivity and cost changes that would ensure survival. One way of supercharging that transformation would surely come from employee ownership followed by an enlightened leadership’s willingness to involve employees and share information openly and freely. With this thesis in mind, I dived into the saga of leading a Canadian Airlines Employee rescue mission that changed my life in so many ways in the ensuing two years.
226 ~ Captain John Dunlop
Chapter 31 ~ The birth of the Council of Canadian Airlines Employees (CCAE)
The plan required the buy-in of all union leaders and I had mapped out the strategy on how to move this forward. First I would have to secure the support and commitment of a lead union before approaching the next most powerful group, the IAM (representing the airlines machinists) and ask them to join. I would perhaps take a cascading approach to the other three unions (the CAW - airport and passenger agents; CALFA - flight attendants; CAST - simulator technologists). I had focused on CALPA because Bob Weatherley had suggested them first but it was also because they represented a substantial percentage of the total employee rescue plan’s dollar contribution. On Saturday morning, August 1, Bob Weatherley called back to give me Captain Dunlop’s phone number. He also said that he had spoken to Carty who was apparently “delighted” with the idea of an employee ownership plan if it could get done in the circumstances as a proposal
228 ~ Bill Farrall
like that would have had no chance of seeing daylight under the leadership of CAIL management whose attempts at securing union concessions had been highly controversial and marginally successful. So I called John Dunlop whose first words to me were, “I hope this is going to be good because I gave up my sailing holiday on the lakes to come back for this,” to which I replied, “If your job and the jobs of our pilots is important to you, this just might be worth your time to hear me out.” Thus began one of the most collegial business partnerships I ever had. I briefly outlined the employee rescue plan which was essentially a wage concession in return for stock but one which was large enough to enable the airline to weather the cash crunch and entice AMR to come back to the table. Based on what I had learned of CAIL’s financial needs I had calculated that if the employees contributed $250 million in wage cuts over three years they would be able to ask for 25% of the company’s voting stock in return. This crudely developed plan was to undergo multiple refinements but in the final analysis and after much wrangling and gnashing of teeth it was a wages-for-stock plan that would eventually have more than 90 percent of the company’s employees giving up varying percentages of wages based on affordability and pay levels. After some thought John Dunlop said, “I’m going to have to take this to the Master Executive Council (MEC) to get their buy in and I replied, “Will Monday be too soon for you to do that?” Dunlop agreed to get on an airplane and call an emergency MEC meeting for Monday in
Chapter 31 ~ Birth of CCAE ~ 229
Vancouver. He understood that CALPA was just one leg of the stool and that all the unions would have to come on-side if the plan was to work. John got his MEC’s support and approval to proceed provided all the other employees participated, which meant they would agree to participate in a syndicated union-led rescue plan. That was the springboard to my next call which was to my old friend and foe, Bill Farrall, the Chairman of the Machinists Union (IAM). I have known many characters in my time but Farrall ranks among the most picturesque. In the years since I first had a run-in with him as a union steward for the accounting department, Bill had put on a few pounds and his face had gained a few lines so that he bore a strong resemblance to Humphrey Bogart. He also had the same oppressive presence. Bill came on the phone after I was put through his switchboard and being not one to dispense salutations like “Mr.” cheaply, said, “So, Sid Fattedad, aren’t you glad you’re not in this mess now that you’ve retired?” I was always glad when Bill didn’t resort to formalities because it meant he was relaxed, and said “Bill, we’ve got to do something to try to save this airline. I have a plan and I need you to call a meeting of all the union leaders so I can present it”. Bill said, “Is this for real or have you been smoking something funny again?” I replied, “No Bill, this is a serious call and I think you’re the only one who can call the union leaders so think about it. It’s up to you.” Bill was no fool and he
230 ~ Don Carty
asked me, “Have you talked to anyone else about this?” I said, “Yes, John Dunlop at CALPA and they are ready to support a coalition plan of all employees”. Bill said, “Then why don’t you ask CALPA to call the meeting?” I replied, “Because the pilots don’t hold as much stick as you do with the other unions.” After a pause Farrall said “You’re up to something!” but he did agree and called a meeting for the following day. Somehow, word of a gathering of the unions to discuss a plan to save the airline got leaked to the news media who learned the location and time of the meeting. Unfortunately I was not aware of this leak until too late and I turned up in the IAM office parking lot on Westminister Highway in Richmond in my Porsche 911! Imagine what that looked like on television! I was an unknown quantity in the news world until then and was able to avoid the scrum outside the IAM offices by just saying, “No comment,” when reporters asked who I was and what I was doing there. Some of the reporters knew my name and knew that I was a recently retired Vice President of Canadian Airlines and were pointedly asking if I was an emissary from the company, to which I said, “No, I am here as a concerned former employee.” Inside the atmosphere was tense with equal amounts of expectancy and cynicism. Bill Farrall, Chairman of the Machinists Union, welcomed everyone into his smallish boardroom which barely accommodated
Chapter 31 ~ Birth of CCAE ~ 231
everyone present. I was struck by the speed at which this meeting was convened and the diverse representation in the room. Present were unions leaders from all the trades – machinists, reservation and airport ticketing agents, accounting, ramp and baggage handlers, flight simulator technicians, pilots, flight attendants, etc. Bill Farrall quickly introduced me and said that I had something to discuss with the assembly. I started by saying, “I want to declare up front that I have nothing to gain personally as I am not employed nor will I agree to be paid for doing this. As you know, I retired from the company in February this year and I have only just come back from Europe so this whole thing has come as a surprise to me. The problem the company has is this: it needs a white knight to provide support. Look, AMR walked away when they saw the company needed more cash than they were prepared to put up by themselves. Air Canada is at the table now but they and their bankers will come to the same conclusion when the time comes. I can tell you, however, that if we go with this plan, AMR will be back at the table. How do I know?” I asked, and Don Carty (CEO of AMR) said “yes.” Let’s look at the plan – it’s a simple one. All the employees of CAIL will agree to a wage cut totaling $200 to $250 million over three years in return for 25% of the voting stock of the company. We will need to find bankers to ‘up front’ the cash to the company with the contractual backing of the employees. We will only agree to do this
232 ~ Gerard Arpey
if AMR puts up $250 million for another 25% share of the company. Employees will be significant shareholders in the new company and will have two seats on the board of directors.” A melee of questions followed and I tried the best I could to answer them. The most memorable one was, “How do we know this can be done?” and I answered, “Hell this is a moon shot. We only get to take one shot but if we don’t take this shot we will fly off into the void!” The union leaders (except for the union representing ticketing agents) agreed in principle to the plan and struck a committee which later was to become “The Council of Canadian Airlines Employees or CCAE.” The purpose of the CCAE was to work out the details and begin the process of making an offer to the company and finalizing the deal. Over the next two years or so this would prove to be a long journey through treacherous territory. A seemingly trivial but important trust-building event occurred soon after the meeting with the union leaders. I received a phone call from Don Carty in Dallas asking me if I would meet within the next day or two with their senior officer on the deal, Gerard Arpey, to discuss the AMR conditions for a deal. Don’s request was for strictly a one-on-one meeting so that Arpey could relay AMR’s position to me. I took a few seconds to think this through and advised Don that I could not agree to a secret meeting and that if a meeting was required I would need to bring along at least one or two union leaders such as Bill Farrall or Captain
Chapter 31 ~ Birth of CCAE ~ 233
John Dunlop. Don thought about my reply and said, “Let’s forget it”. The meeting did not take place but I did relay the incident to the CCAE. Bill Farrall and Captain Dunlop both told me that while they would have liked to have known what Don Carty was up to it was the right decision on my part not to meet with his emissary. These many years later I still wonder what future AMR CEO Gerard Arpey would have told me had that meeting taken place. One of the first things to do in war is to organize the war effort under a central command. Immediately following the merger announcement in July the employees of Canadian Airlines acted spontaneously under various local leaders across the country to publicly protest the merger with Air Canada. With the formation of the CCAE it made sense to centralize and coordinate employee activities under the umbrella employee organization. Here too we were extremely lucky to have many volunteers in Vancouver and across the country who joined the cause, as it were, once the CCAE was formed. Among the most diligent and prolific team members of the CCAE rescue effort were Bev Hewitt (the plant from Jenkins’ office when I was in Calgary) and Cecilia Descurtins, a flight attendant. These two ladies took over coordinating the daily employee lobbying efforts across the country and sent frequent rescue updates to employees to keep them in the loop on the efforts of the CCAE. Bev Hewitt was so committed to the cause that she packed her bags and
234 ~ Marty Kovnats
moved to Vancouver from Calgary just to be where the War Room was located. I will venture to say that the CCAE phenomenon was almost unique in its scale and level of sustained employee effort! I am happy also to note that out of all this came a future success story. Bev Hewitt, a.k.a. Bev Behan has since become a published author and corporate governance guru and now practices her trade as a board governance expert in New York City. I will forever be in her debt for her devotion to the cause. I remember she would be prowling around the War Room from early morning til nightfall making sure that any and all dispatches to and from the front lines across the country were dealt with. She drafted rescue updates ad infinitum and kept the team informed so much so well that I once likened her to the Ever Ready Bunny!
Chapter 32 ~ The CCAE years and “the Order of the Salmon – the glory of a fabled company’s employees
There are so many stories from this period that it would fill another book but I will only highlight some of the most unforgettable people and milestones here. One of the most amazing things in life is that sometimes good things come from out of the blue, just when you need them most. In my case some of the truly important players in the whole saga of rescuing Canadian Airlines from the grasp of Air Canada came in the persons of our legal and investment advisors. Marty Kovnats, a lawyer from the firm of Goodman and Carr in Toronto turned up one day to offer his firm’s services. They had just completed an assignment representing the employees of Spruce Falls Pulp and Paper in a recent employee investment scheme. In the same vein Ken Shields, a partner in the Vancouver firm of Goepel Shields, investment advisors, offered their services.
236 ~ Spencer Dane
No part of the CCAE story can be told without explaining the important role of one of its central characters, Marty Kovnats, our legal counsel. Marty was a stranger when he arrived to present his credentials but his presence was immediate and electric. Marty has the visage of an eagle, with a prominent beak and, oh those eyes, that bore a hole in anyone he looked at. His metaphor of the employee rescue initiative as a lifeboat that all the employees unions of Canadian Airlines shared a duty to keep afloat was used many times over during the years ahead. Marty was not just a legal counsel, he was a brother and a true friend and the most talented corporate lawyer I have ever seen in action. He had no fear and regaled the CCAE team time and again with uplifting comments and optimism that fueled us in the darkest times. In my opinion we could not have done what we did without Marty and he is owed an eternal debt from the employees of CAIL although Marty would be quick to point out, “But I got paid to do this, albeit at a fraction of what the law firm of Bennett Jones got paid by the company!” The Opening Salvo On August 13, 1992 I signed a letter as Chair of the CCAE to the Board of PWA, the holding company of Canadian Airlines International, outlining the employee proposal. The letter also bore the signatures of Bill Farrall (IAM), Roberto Sprugnoli (CUPE), Captain John Dunlop
Chapter 32 ~ The order of the Salmon ~ 237
(CALPA), Bill McCauley (CADA), David Strauss (CAST) and Spencer Dane, representing non-union and management employees. The letter proposed that employees of the airline and its affiliates invest between $150 and $200 million in the company through the acquisition of fully participating shares of the company from treasury at market price. The employees would be seeking board representation but the letter made it clear that the employees were not seeking control of the board nor management changes. Employees would apply on average 10% of their salaries for the next three years towards the share purchase. They would attempt to make arrangements with one or more financial institutions to lend them the necessary amount to make the full investment immediately with interest at the bank prime rate. The loan would be full recourse secured by a pledge of the shares acquired. The proposal was subject to a number of conditions including the signing of a binding agreement by the company with AMR Inc. on terms substantially the same as those already negotiated and otherwise satisfactory to the CCAE. The letter also stated that the CCAE had had discussions with AMR Inc. which was aware of the proposal and had indicated their continued interest in consummating a transaction with the company. AMR Inc. viewed the proposed equity participation of employees as a distinct benefit to the company. The letter indicated that senior bureaucrats and politicians of Alberta and British Columbia had expressed strong
238 ~ CCAE
support for the proposal and indicated a willingness to discuss means of assistance. The letter also indicated that a number of federal politicians including cabinet ministers had expressed support for the proposal. We outlined the benefits of the proposal which included: 1) An important strategic alliance with AMR could proceed. 2) Being financially involved would motivate the workforce. 3) A significantly strengthened balance sheet. 4) Air Canada’s aggressive pricing would likely end when faced with a well-capitalized strong competitor. 5) Employee involvement would likely facilitate government assistance that might otherwise not be available. 6) A strengthened balance sheet would facilitate the acquisition of further capital. 7) Employee involvement could speed up regulatory processes. 8) There would be far fewer job losses under the employee proposal as opposed to a merger with Air Canada. 9) The significant hard and soft costs associated with a merger would be avoided. Finally, 10) A more efficient and motivated airline would emerge. The letter closed with three requests: 1) That the board authorize management to enter into immediate discussions with the employees and AMR. 2) That the board provide CCAE with access to appropriate records for due diligence and 3) That pending discussions with employees and AMR any decisions regarding a merger with Air Canada should be postponed.
Chapter 32 ~ The Order of the Salmon ~ 239
On August 14, 1992 the signatories to the proposal were invited to appear at the PWA Board meeting in Calgary where I made a verbal presentation to the board summarizing the proposal and pledging the support of the employees to ensuring the airline’s survival. At the end of my presentation, the board gave the employee council a standing ovation. Many board members made statements of thanks and appreciation for the employee effort. Here I must say that subsequently we learned through access to minutes of that meeting that there was a degree of insincerity in that display of appreciation. The minutes recorded that upon the departure of the CCAE contingent it was moved and seconded by certain board members that the CCAE proposal be accepted because it could be used as a “stalking horse” in the continuing efforts to save the company from bankruptcy. (The “stalking horse” concept allows a distressed company to disallow low bids on its assets. Once the stalking horse has made its bid, other potential buyers may submit competing bids for the bankrupt company’s assets. In essence, the stalking horse sets the bar so that other bidders can’t low-ball the purchase price.) In short, we were being used to lever up the ante. At that time, however, we were euphoric and came away from the meeting with the distinct impression that the board was fully supportive of the employees.
240 ~ Brent Aitken
The Board’s acceptance of the employees’ request to authorize management to enter into discussions with the employees opened the door to financial assistance from CAIL to the CCAE and cleared the way for its legal and financial advisors to be paid their fees. (The CCAE did not have its own financial resources.) I should note here that true to my original pledge I never asked for nor did I ever receive any compensation throughout the entire airline rescue effort. The other not so positive outcome was that the board advised us that “management” could not include Kevin Jenkins who was otherwise committed to good faith contact with Air Canada whose merger offer was still on the table. So the CCAE was assigned Brent Aitken, the Senior VP. And legal counsel, as the CCAE’s contact point person in PWA. On August 18, 1992 I signed a non-disclosure agreement on behalf of the CCAE with CAIL that opened the company’s books and forecasts to the CCAE and its advisors for due diligence work. On August 26, 1992 PWA Corporation advised the CCAE that the company had made the following requests of the Federal government: (1)
Purchase the surplus A310 aircraft for use by the Canadian forces for approx. $500 million
(2)
Provide a tax ruling on the employee investment plan on an
Chapter 32 ~ The Order of the Salmon ~ 241
expeditious basis (3)
Expedite regulatory approval
(4)
Introduce capacity restrictions or through the competition bureau prevent Air Canada’s predatory pricing practice
(5)
Protect CAIL on its Asian routes On August 26 a revised financing plan was received from PWA
Corporation that began to “unravel” the tightly controlled CCAE/AMR deal. The following is a summary of the proposed plan: Before closing:
($ millions)
Government (1)
$ 150,000,000
At closing:
Employees (2)
$ 100,000,000
AMR
$ 250,000,000
Capital markets (3)
$ 100,000,000 $ 450,000,000 _____________
$ 600,000,000
(1)
4-5 year line of credit to be drawn as required
(2)
Receivable over three years. May require government backstop
242 ~ Gordon Capital
at closing if chartered banks fail to loan at least $50 million against the security of the employee’s receivables (3)
Gordon Capital will provide a comfort letter stating that they
can raise equity of $100 million without a government backstop, provided the other players are in place. By “unraveling” the tightly controlled deal, I mean that the company introduced the element of government-guaranteed line of credit which would eventually open the door to a full scale corporate restructuring later in 1992 when the federal government stepped in and demanded that PWA creditors restructure the airline. We thought we could keep the rescue effort from falling into the trap of CCAA, the Canadian equivalent of the American chapter 11. More on that later. PWA Board meeting progress update by CCAE.
On September 9, 2012 we met with the board of PWA to update them on the rescue plan with the following information (With me were Captain John Dunlop, Bill Farrall and Roberto Sprugnoli). Regarding the employee investment plan we reported that since our last meeting with the board on August 14, our target investment had
Chapter 32 ~ The order of the Salmon ~ 243
been reduced to a range of $120 to $150 million because the company had advised that its financial needs did not require dilution to the extent previously contemplated. Also Gordon Capital had indicated they could place a $100 million equity issue and finally, the employees reduced the amount of cash input (They had in the interim agreed to wage stand-stills until 1995). The stand-stills included an undertaking that labour unions would not file for common employer status when work was transferred to AMR if and when the reservations system switched over to Sabre from the current Gemini platform. We also reported that CAW (representing airport and reservations agents) remained uninvolved although we had over 500 pledges of support from individual members. On labour conditions we reported that during our due diligence work we discovered that earlier in the year the company had provided AMR with a business plan that included wage freezes and that this had been done without the knowledge of the labour unions. We reported that with the exception of a 2% wage increase re-opener for the IAM (due in May 1992) all AMR-related conditions were met. The 2% wage re-opener would be paid for by the pilots who would fore-go a 1% increase from an earlier 3% wage increase. The flight attendant’s union also offered a concession to help pay for the machinist’s re-opener but the net effect of the adjustments would still mean an annual cost of $2 million.
244 ~ The employee/AMR deal
On government assistance we reported that we had received preliminary indications of support from BC ($20 million), Alberta ($50 million) and Manitoba ($25 million). On behalf of the employees, we posed the following questions to the PWA Board: 1) Who would be more likely to close a deal? Air Canada or the employees and AMR? We said that Air Canada would need to get past hurdles including the Competition Bureau, the National Transportation Agency, the PWA Act of Alberta and labour peace with contractual re-openers and expiries upcoming, cost-to-close, common employer status. Finally we questioned whether a combined Air Canada and Canadian Airlines with their total debt would be financible. We posited that with the employee/AMR deal, none of the above issues would apply. 2) Why would the board say no to us when we had made such progress in three weeks and had momentum on our side? If the board chose Air Canada the AMR alternative may disappear as they might lose interest.
September 9, 1992 - The PWA Board rejects the employee/AMR deal
Chapter 32 ~ The order of the Salmon ~ 245
The following CCAE employee rescue update was sent out on September 9, 1992: “As you know, the Board of PWA Corporation made a decision today to accept the Air Canada merger offer. This decision was made in the board room with very few dry eyes. It was a particularly hard choice for the board because we believe we had convinced them of the feasibility of the Employee plan. Moments after our meeting, promised financial support was withdrawn by one of the provinces (Manitoba). The Council respects the decision which had to be made by the directors in the face of a fast-dwindling bank account. The continued intransigence of the CAW in refusing to join in the employee effort was also a big detriment to the cause.” For the record, the proposal we placed before the Board in our view had met all the conditions of AMR except for the lack of support from the CAW. The financial conditions were also met until the last minute evaporation of $25 million from the province of Manitoba. We continue to believe that if these two conditions could be overcome we would have a shot at keeping the company. The alternative is simply full-scale merger over time – perhaps a year or two. These are times when lesser men and women buckle under to forces, seemingly unstoppable in corporate warfare. No doubt some of you
246 ~ Hollis Harris
might even be breathing a sigh of relief that a decision has been made at last. We must all find a way to overcome the damage our cause has sustained today – we don’t believe this was a mortal hit! There is still time to mount one final effort – STAY TUNED!!!!! This is the last communiqué which will reach you through officially sanctioned channels. Other channels will be found. Yours, Council of Canadian Airlines Employees. Manitoba government pulls a fast one on the CCAE We had heard on the evening of September 8, 1992 that Hollis Harris, the president of Air Canada, had arrived at Winnipeg airport and the conjecture was that he was there to see the premier in a last ditch effort to dissuade him from supporting the CAIL employee rescue plan. We guessed the danger was that if the deal with AMR went ahead it would mean the end of Gemini, which was a big employer in Winnipeg. In addition, who would blame Harris for going so far as to suggest that the Air Canada Winnipeg maintenance base would be closed if the Air Canada merger plan failed? We felt that the government of Manitoba
Chapter 32 ~ The order of the Salmon ~ 247
chose between, losing CAIL or losing Gemini (and Air Canada) and decided against the West. It’s too bad they did not have the decency to advise the CCAE before springing a surprise phone call to the PWA board on September 9! In the fullness of time all these things pass and Premier Gary Filmon of Manitoba wouldn’t much care today what he did back then. The only impression that he left on me was that people were right to say, “Never trust a politician!” A telephone conversation with Kevin Jenkins On the evening of September 9, 1992 (after my return to Vancouver from Calgary), I phoned Kevin Jenkins with the express purpose of asking him to keep the lines of communication open between the company and the CCAE. Kevin Jenkins’ reply will forever be etched in my memory. He said he would not continue to deal with the employee group as he had been assigned the task of dealing with Air Canada and the two were mutually exclusive. He told me that the employees had given it their best shot but that they had failed and should now let the merger process with Air Canada play out. He did say, however, that Rhys Eyton would not be similarly obligated and that I should talk to him instead. This was a ray of sunshine as I knew that in his heart of hearts Rhys Eyton was very much against the Air Canada option. That would be the last conversation that I would have with Kevin Jenkins for many months.
248 ~ Jean Chretien
Jean Chretien, leader of the opposition Liberal Party, attends employee rally in Vancouver on September 12, 1992 Three days after the treacherous treatment by the Manitoba government the employees at CAIL held a rally to welcome Jean Chretien, leader of the opposition Liberal party. The future Prime Minister of Canada addressed a gathering of more than 300 employees at the Vancouver operations centre to urge them on in their fight for independence. Mr. Chretien voiced his Liberal party’s opposition to the merger and thanked the employees for their show of support. He promised to do all he could to ensure that there would be open competition in Canada’s aviation industry. Many years later in 2011, I ran into a retired Prime Minister Jean Chretien having dinner with Ross Fitzpatrick in a restaurant called Lavender in La Quinta, California. I reminded him of his visit to the airline in the summer of 1992. He remembered it as if it were yesterday and said he was still impressed by the spirit of the employees of Canadian Airlines in those days! Updating the employees on September 13, 1992 A CCAE update to employees was sent out on September 13 to keep their hopes alive. The update included the following:
Chapter 32 ~ The order of the Salmon ~ 249
Air Canada had, since the board decision on September 9, offered a $100 million line of credit to CAIL pending negotiation of the merger. The merger envisioned two separate airlines: Air Canada and Canadian and they would continue to operate separately. In our opinion, Air Canada would at the same time continue their fare -discounting campaign to drain our bank account. Any resistance by CAIL or its employees could cause Air Canada to pull their line of credit, bankrupting CAIL and allowing them to avoid the enormous severance costs that would come with a merger. They would by default inherit CAIL’s international routes while hiring former CAIL employees at new entry rates without pension. This would also go over well with the federal government (conservative party) whose stated arm’s-length private sector solution objective would be satisfied by a bankruptcy at CAIL. The update, sent out to CAIL employees via private mail networks included the following questions about the Air Canada merger. We felt that employees should be discussing these questions amongst themselves and with their MP’s. 1. How many employees will the merged airline retain and how many will be laid off? 2. How much debt will the merged airline have and how will it pay down its debts since both Air Canada and CAIL were financial basket cases? 3. Is it true that the new merged airline, according to our estimates, would need $1 billion in new equity in order to be well capitalized?”
250 ~ Rhys Eyton
The CCAE update concluded that we felt we could still do the AMR deal. Employees by the thousands reacted positively to this update and the CCAE was inundated with messages of support and encouragement to carry on the fight, a fight which sadly had to go underground for some time because CAIL could not be seen to be openly negotiating with Air Canada. A further update on September 17, 1992 In update #36 dated September 17, the CCAE advised employees that we had met with senior officers of AMR and reconfirmed that once we met the financial conditions for restructuring the company, they would be at our side when we present our bid to the PWA board again. The update also attempted to reduce the animosity which some employees felt toward CAW union members for their unions refusal to participate in the September 9 talks. We told the employees that we were working hard to carry on the fight but that they should prepare for the day when the non-financible Air Canada merger would blow up in Hollis Harris’ face. We predicted that this would happen at the latest at their November board meeting.
Chapter 32 ~ The order of the Salmon ~ 251
An open letter from the CAW to Rhys Eyton In order to be fair in my recollection of the role of the CAW in the employees’ effort to save CAIL, the following excerpts from the union’s open letter on September 14, 1992 to Rhys Eyton are for the record: “Dear Mr. Eyton I was surprised by your comments to the media that the CAW is responsible for the demise of CAIL. If we were so critical to the survival of the airline why did you and other senior company officials refuse to neet with us? We offered to work with Canadian management to find a way to help the airline survive. You refused our help. You had no interest in working with us. You took advantage of the fear and uncertainty of your employees and sponsored an “employee council” whose sole purpose was to pressure your employees to commit a percentage of their annual salary for a minimum of three years. Your secondary goal was to get an agreement from the unions to accept four year contract extensions. We are convinced that the share proposal would have been rejected by members of the other unions. You must be aware that the IAM leadership in Toronto and Montreal voted to reject the share proposal. In Vancouver, judging by the phone calls and letters we have received from IAM members, the proposal would have been defeated. Employees from all groups have been disgusted by the company’s blatant sponsorship of the “employee council”. Canadian
252 ~ The Letter
management provided the council with a fully equipped office in the Lysander Lane building in Vancouver. Council members were paid by the company to work on a full time basis to develop and promote the share purchase scheme. The council was given complete access to the company’s communication system to distribute daily bulletins. A video was produced which contained no concrete information about the scheme. Its sole purpose was to convince CAW members to pressure their union to agree to a mandatory contribution scheme. The few CAW members who were willing to campaign for the employee council were paid their normal salary to lobby their co-workers in the workplace. In Calgary reservations, Peter Janovcik and others were given the use of their boardroom and full access to their coworkers. When other employees complained, they were moved to another office on the same floor. We are advised by CAW members involved with the employee council that you are continuing to meet with them and are encouraging them to fight the Air Canada merger. If this is true does this mean you are working against the interests of your own board of directors? Isn’t it ironic that Calgary Reservations worked so hard on a scheme to save the company without knowing that part of the deal you negotiated with AMR was the closure of their work place. From information leaked by the IAM and confirmed by senior management officials we know that if the AMR deal had gone through all reservations offices except Montreal would have be closed. Over 900 employees in the six offices would
Chapter 32 ~ The order of the Salmon ~ 253
have been laid off. Those were not the only jobs that would have been moved to the U.S. Payload Control: Crew scheduling and Load control would also have been lost. The CAW would have lost at least one third of our members. No wonder you refused to meet with our union. You could not risk the CAW having this information confirmed before the AMR deal was signed. We have no quarrel with the other unions. Each union looks after the interests of its members. The pilots’ and flight attendants’ jobs depend on the number of aircraft in operation. They are convinced that the AMR deal would operate the same number of aircraft so they did not believe their jobs would be affected. We believe they were shortsighted. There are no guarantees that the aircraft will not be sold or rerouted. Regardless of the 25% equity investment by AMR all real operational control of Canadian Airlines would have been transferred to AMR. The IAM leadership was convinced that with the AMR deal Canadian’s aircraft would continue to be serviced in Canada. AMR has determined that its future prosperity depends on providing a service contract to other airlines. AMR has two maintenance facilities in Texas and is building a facility in Mexico. We believe that maintenance work will be moved very quickly to AMR. The IAM accepted that with the AMR deal over 400 accounting jobs would be lost when the work is transferred to AMR. Last year the CAW bargaining committee spent
254 ~ CAW
the summer with Canadian management to discuss the company’s financial problems and look for solutions to those problems. We have a collective agreement in force until July, 1993 so we could have refused to meet. That has never been the CAW’s approach to problems. We have always been able to work with Canadian management to solve problems particularly when we face common problems such as the crisis in the airline industry. Until today we believed there was mutual respect and an interest and an interest on both our parts to maintain a good working relationship. During the discussions last year it became clear that labour costs were not the problem. In fact labour costs account for only 15% of costs. Eighty-five percent of the company’s costs are attributable to fuel taxes, landing fees, leasing costs etc., To reduce those costs required federal government intervention. The CAW twice offered to mount a campaign to pressure the federal government to address the problems. Canadian Airlines declined our offer. Canadian management tabled a number of proposals to reduce labour costs in our bargaining unit. We were able to reach agreement in a number of areas. The final issue was the 5% wage increase scheduled for July 1992. The CAW proposed to delay a wage increase until January 1993 to substitute a cost of living increase for the 5% increase and to extend our contract to July 1994. CAW members would have received a wage increase of only 1.5% - a saving of 3.5% to the company. Company negotiators took that proposal back to senior company officers who rejected the offer. The company then
Chapter 32 ~ The order of the Salmon ~ 255
ended the negotiations. Following those discussions with the company we held membership meetings across the country. Members passed motions giving clear direction to the bargaining committee that they would not give up their wage increase and did not want the CAW to continue negotiations. Mr. Jenkins once said that he expected all employees to act in their own best interests. The CAW’s legal and moral responsibility is to act in the best interests of its membership. We were prepared to work with you to save this company. We wanted to tackle the long term problems in the industry so that Canadian Airlines could operate without continuing to lose $700,000 a day. If we had joined together we would have forced the federal government to provide bridge financing and loan guarantees to get Canadian Airlines through the crisis. By focusing solely on the share scheme and putting the burden on your employees, you let the federal government off the hook. By their policies the federal government caused the problems in the Canadian Airline industry. They should be forced to assist in finding the solutions. Attacking the BC government is just an example of partisan politics. The PWA board of directors is made up of strong Tory supporters. An NDP government is fair game to Tories. In fact, the BC and Ontario governments were prepared to help Canadian Airlines provided the federal government got involved. Those provincial governments recognized that if a long term solution was not found, if the airline continued to lose $700,000 a day, taxpayers’ money would be wasted. The AMR deal was
256 ~ Tom Kilpatrick
clearly not in the best interests of Canadian employees. Our bargaining unit would have faced the largest job loss in the short term but in the long term all employees would have been the loser. The CAW focus until now has been to maintain two major airlines in Canada: Canadian and Air Canada. That issue has not been lost. We are now focused on ensuring that when the Air Canada purchase is approved, any resulting job loss be managed by a restructuring of the company though early retirement packages, retraining programs, etc. Offered the choice of an AMR or Air Canada deal, the lesser of two evils is definitely a merger with Air Canada. At the very least work will remain in Canada so employees who are laid off will have a chance to be recalled in the future. We have no recall rights to jobs in the U.S. We do not believe that the job loss will be as high for our bargaining unit as it would be in the AMR deal. We will continue to lobby provincial and federal governments to ensure that the regional concerns are addressed including service to communities and jobs maintained in all regions. If you are sincerely committed to your employees, you will do the same. We know your comments to the media were intended to slam the CAW leadership. We understand your disappointment. You gambled and lost the game to your hated competition. What you do not seem to appreciate is that the CAW leadership speaks for the membership. The
Chapter 32 ~ The order of the Salmon ~ 257
leadership is not separate from the membership. The CAW Executive and Bargaining Committee members are Canadian employees who work in the workplace right beside the membership. We have only two full time elected officers whose real jobs are back in the workplace. We are confident we speak for our members. We have their support. You owe our members an apology for your comments. Our members are highly motivated, dedicated employees. They deserve your respect. All business decisions in this company are made by you and your management team. Employees are powerless when management decides to acquire other airlines, such as the most recent Wardair merger, or to purchase aircraft. To blame those employees for the failures of this company is reprehensible. Signed: by Tom Kilpatrick, President, CAW Local 1990 Further to the above memo, Rhys Eyton did respond to the CAW local 1990 president denying that the employee council was companysponsored and that it was driven by the leadership of the majority of the unions within the airline. The response did not dispute the job loss numbers under an AMR deal cited by Kilpatrick. As a post script commentary I personally feel the CAW had
258 ~ Bob White
legitimate concerns that the largest job losses were from their membership and could not be seen to be jumping into bed with the CCAE. What amazes me still is the fact that during the previous year while they were negotiating with the company on cost savings, the potential impact of the AMR Sabre deal appeared to have been non-existent and indeed was never discussed. Had that possibility been put on the table, I am convinced that Kilpatrick and his negotiating committee would not have come anywhere close to offering to take a deferred and lower wage increase. Hindsight is almost always more intelligent and in this case I suggest that transparency and honesty in the bargaining process would have been better than the storm of bitter accusations of conspiracy on the part of the company. I have been told by anonymous sources that the company’s less than candid approach was based on the fear that the truth would almost inevitably have resulted in job action by the CAW and the company could not afford service disruptions. One further point that should be made regarding the CAW’s opposing positioning: their national leader, Bob White, was a very powerful labour figure in Canada who was just about to become the head of the Canadian Labour Congress. The CAW’s political clout in Ottawa and the provinces was consequential and in the months to come we would find out how consequential as every politician and bureaucrat we came into contact with expressed concern that the CAW faction of CAIL had
Chapter 32 ~ The order of the Salmon ~ 259
not signed on to the employee rescue deal. To illustrate, Bob White’s prominence in Canadian political spheres resulted in his being awarded the Order of Canada. Had we paid more attention to the politics we might have taken more care to bring the CAW on side earlier, but then, based on their fundamental platform that deregulation of the airline industry should be reversed, it may have proven to be an exercise in futility. Twenty years after the fact, hindsight is purely rhetorical anyway! The Order of the Salmon It was during this time of turbulent struggle by CAIL employees that their almost legendary spirit emerged. I recall at a staff rally in Toronto I was asked to give an address to a large audience to encourage them to persist in their government lobby efforts the following words came tumbling out of my mouth, “Don’t be discouraged by the odds that seem to be against us, never go with the flow because only dead fish go with the flow.” The quote was pcked up by the CCAE War room team and re-broadcast across the system with electrifying results. We were soon to hear from politicians that “their fax machines were jammed with employee petitions and would we please stop?” An actual Order of the Salmon Award as created by the CCAE when the rescue plan was successfully completed was given to many
260 ~ John Manley MP
volunteers and leaders of the employee lobbying efforts during this period.
Chapter 33 ~ How bureaucrats and politicians behaved
Shortly after the PWA Board decision to merge with Air Canada, many wheels began to grind within the federal bureaucracy. The Competition Bureau became much more active and moved up their pace in investigating the proposed merger. One of the first new releases came from the Opposition Liberal Transport Critic on September 9, 2012. John Manley MP called on the federal government to stem the destructive practices of Canada’s airline companies. Mr. Manley said, “The airlines are engaged in destructive, rather than healthy competition and, therefore, government action is necessary. Both national carriers are generating huge losses daily with the result that Canadians will be faced with either a monopoly or increased foreign ownership. In either scenario jobs will be lost. In particular, Mr. Manley wants the government to introduce measures to prevent the dumping of excess airline capacity on the market at non-compensatory
262 ~ Captain John Dunlop
prices. Mr. Manley added, “Air travel is of such strategic importance to the country that it would be irresponsible to just sit idly by while the industry destroyed itself. If the airlines can’t or won’t consider the country’s needs, the government must act.” Notes from Captain John Dunlop at a meeting with the Minister of Finance and Deputy Prime Minister – Don Mazankowski (Maz), sometime post September 9, 1992. Captain John Dunlop along with Brian Beaton for the IAM and Diane Maloney-Hand for CUPE were granted a wide-ranging meeting by the Deputy Prime Minister along with his Chief of Staff, Greg Ebel. The following are notes excerpted from Captain Dunlop’s meeting and while they may appear to portray Mr. Mazankowski in a partisan light they should be taken as hearsay as there was no recording of the conversation. The nickname “Maz” is a well-known reference to the Honorable Don Mazankowski. “Maz agreed the CCAE was a unique movement, especially the unity of the five unions.” He questioned whether the PWA board was fully aware and appreciative of the employee contribution.
Chapter 33 ~ Bureaucrats & Politicians ~ 263
Maz aggressively defended the government’s role as referee since the third week in July when the PWA board approached Ottawa for financial assistance. He said that he attempted to ensure that Canadian would be merged with Air Canada prior to bankruptcy for the sake of its employees. The government refused to complete the A310 purchase because it was a major unbudgeted cost for that fiscal year. Maz stated that the AMR deal was consistent with government policy and later said that the Air Canada merger was not consistent with government policy. Maz indicated that the AMR should be taking the initiative to move the goal posts to overcome the covenants in the AMR agreement so that an agreement could be finalized. Maz indicated that he had many talks with Rhys Eyton and Claude Taylor on the matter of destructive capacity and price dumping but to no avail. Maz recognized the major job losses inherent in the proposed Air Canada merger but doubted that his government could be forced to pay
264 ~ Mr. Howard Wetston
the one billion dollars in severance, relocation and equity infusion required to keep the merged company afloat. He offered to phone Dick Johnston (Alberta’s Treasurer) following the meeting as a follow-up to his earlier statement that provincial governments were “jacking us around”. Captain Dunlop reported that with his body language and words Maz would really like to see the employees of Canadian succeed in keeping CAIL separate and independent. If anything, he supports us more now than he ever did, according to Captain Dunlop. News release – Mayors against Merger On September 14, 1992 a press release was issued by Mayors Gordon Campbell of Vancouver, Greg Halsey-Brandt of Richmond and Beth Johnson of Delta voicing their collective opinion on the proposed merger of Air Canada and Canadian Airlines International. Citing major concerns about the impact of the merger on their municipalities, the region and the province, the mayors will recommend to their respective councils that the Premier and Finance Minister be urged to provide the necessary financial guarantees to facilitate Canadian Airline’s Employee Council’s proposed alliance with American Airlines. The mayors also
Chapter 33 ~ Bureaucrats & Politicians ~ 265
recommend that the Union of B.C. Municipalities call upon the Federal Government to set aside the proposed merger through the Bureau of Competition policy and the National Transportation Agency. The Bureau of Competition Policy Mr. Howard Wetston, head of the Competition Bureau, was a friend of competition and a foe of monopolies and he showed from the very beginning of the process that he would be fair-minded but true to his mandate – that of being the competition watchdog. He stepped into the fray by directing Rhys Eyton and the PWA Board to “shop the deal” thereby re-opening the door for resurrecting the CCAE/AMR proposal. Throughout the months following the July 1992 announcement of an Air Canada/Canadian merger, Mr. Wetston was always available to answer questions from the CCAE and provide guidance on the Bureau’s mandate and powers. Air Canada’s Merger Committee fails and a crisis forces the federal and provincial governments to step up to help the Canadian Airlines employee initiative. As predicted, by early December 1992 the Air Canada Merger Committee reported to the Air Canada Board that the proposed merger was not financible and that they would have to leave Canadian Airlines at
266 ~ PWA Board
the altar, as it were. (This was generally believed to be a conclusion arrived at after their request for financial support was rejected by the federal government.) In the meantime, the CCAE had not been idle and, having made all the necessary adjustments to labour contracts and compensation issues to enable AMR to remove their conditions for putting up their share of the deal ($246 million), were able to bring a deal to the table that was only missing the government guarantees. This put immense pressure on the Conservative government as well as the provinces of BC and Alberta to provide the necessary guarantees for lines of credit. By the middle of December 2012 all government guarantees had been obtained but they were subject to the company’s entering into a comprehensive restructuring program whereby creditors would be asked to take haircuts. The Board of PWA was once again put in the position of having to accept more intrusion into their powers by not only having to accept employee board participation but also the presence of federal government observers in the boardroom during the process of restructuring. Faced with no alternative now that the Air Canada deal had fallen apart, the PWA Board relented and the next chapter of the Canadian Airlines saga would begin shortly after Christmas 1992. 1993 was a challenging year Following the collapse of the merger, Air Canada’s next step was
Chapter 33 ~ Bureaucrats & Politicians ~ 267
to launch an all-out offensive to block the AMR deal by opposing the deal through the National Transportation Agency (NTA), arguing that the AMR deal contravened foreign ownership rules. Air Canada would also challenge PWA’s right to consummate the all-important sub-contracting of the reservations system to Sabre and away from the joint venture Gemini system. These actions led to a lot of sleepless nights and anxious moments for the company as well as the CCAE but as the year ground on the skies began to clear. On May 27, 1993 the NTA ruled that the AMR deal did not contravene foreign ownership rules. This meant that the only remaining but not immaterial obstacle was the successful extrication from Gemini by Canadian Airlines. On July 30, 1993 the Gemini case was settled by the Federal Court of Appeal whose ruling allowed PWA to de-host from Gemini thus opening the way for the consummation of the AMR agreement. The court gave Gemini the right to receive twelve months notice of de-hosting which set the scene for the eventual migration of the reservation system to Sabre in 1994. There were many obstacles thrown in the way by Air Canada through blocking maneuvers as PWA negotiated the breakup fees with Gemini. However, eventually the de-hosting was accomplished and Canadian Airlines was able to move on...to a not uneventful next few years as Joss [1] continued to play a role in its journey. Towards the summer of 1993 I was contacted by a head-hunting firm for the position as Chief Financial Officer of the Workers
268 ~ Premier Mike Harcourt
Compensation Board of British Columbia. I decided that it would be a good time for me to turn my attention to my own future career. I was only 49 years old and felt there was still mileage under the hood. I interviewed with the President of the organization, Ken Dye, who was the former Auditor General of Canada. He indicated to me that he was targeting to have me onboard by the end of summer. Unfortunately, he left the WCB in August and I did not hear from them again until September when the Chairman, Jim Dorsey arranged to meet me for a walk around Stanley Park on a Saturday morning. We had a good chat and at the end of the walk he accompanied me to the parking lot of the Westin Bayshore Hotel where I got into my car, the Porsche 911. His parting comment was, “The pay is $125,000 a year and we won’t pay for that car!” And so it came to pass that I moved on to start another career that spanned fourteen years until I retired in 2008 as Chief Financial Officer of the WCB of BC. I should mention here that my work for the employees of Canadian Airlines and the CCAE did not go unpunished in the British Columbia labour movement. At their annual convention in November 1993 the BC Federation of Labour accepted a motion from the floor (led by the CAW) that the appointment of Sid Fattedad to the position of Chief Financial Officer of the Workers Compensation Board should be rescinded by the NDP government and condemned as a labour-unfriendly move by the board of the WCB. Funny how boomerangs work! The fact that the NDP government of the day did not respond to the
Chapter 33 ~ Bureaucrats & Politicians ~ 269
“down with Fattedad” motion speaks somewhat to the relationship that I had developed with Premier Mike Harcourt from earlier days. I was involved in liaising with Mr. Harcourt when he was Mayor of Vancouver and pitching for corporate sponsorships for Expo 86. Later I had dealings with Mr. Harcourt when I sat on the Board of the Vancouver Board of Trade. Joss [1]. A contemporaneous circumstance affecting Canada and its Federal and Provincial Politicians and Bureaucrats It has been alleged that from 1992 to 1995 the federal and provincial governments of the day were unsupportive (except for Alberta) of PWA/CAIL and to some extent the employees of the airline. I know that during the entire saga conversations and strategies were always focused on how we could put pressure on governments to put up loan guarantees or buy the airbus A310 aircraft and reduce fuel taxes. When I look back on that time it dawns on me (somewhat belatedly), that the conversations within and among the PWA Board, the CCAE, the union leaders and various employee groups never focused on the fact that Canada itself was undergoing a crisis of its own. The country’s debt had risen to the second worst level right behind Italy. In 1994/1995 the federal government officials fretted as a bond auction was thirty minutes away from closing and not a single bid had come in. Debt rating agencies
270 ~ Judi Korbin
such as Moody’s and Standard and Poor’s had drastically downgraded the US dollar Canadian debt. The Canadian debt to GDP ratio was 70% and rising while the loonie had plummeted in value and there was talk of IMF intervention. It was, therefore, no wonder that politicians and bureaucrats appeared skittish whenever they were asked to provide guarantees for bank lines as there was little room for them to take on more financial liability without attracting the attention of the rating agencies. I suspect also that serious thought was being given to big program cuts in the federal budget that would affect all Canadians in all walks of life and there must have been fear in Ottawa that financially backing airlines (either Air Canada or CAIL) would appear insane if it were done when program spending needed to be cut to the bone. In this regard I think the employees of CAIL owe federal government officials as well as those from British Columbia and Alberta an even more appreciative vote of thanks for even the small amount of help that they gave in the circumstances.
Chapter 34 ~ It was never easy being employee-nominated directors on the Board of PWA/CAIL
In early 1993, I was nominated by the CCAE to be one of their representatives on the Board of PWA. In addition to me employees chose to nominate Judi Korbin, a former Vice President of CP Air, who left after the CP Air/PWA merger to join a highly successful labour arbitration partnership with Vince Reddy. Judi and I had been very good friends at CP Air, having shared among other things a hilarious evening in 1985/1986 during the “common front” bargaining episode when the CAW and IAM joined together to bargain as a common front. This incident perhaps sowed the seeds of destruction that later blossomed into open animosity between the CAW and the CCAE. The common front saga came to a head when the unions comprising the front declared to the company (Don Carty was President then) that employees would begin walking off the job at midnight unless the company agreed to their demands. Unknown to the IAM, however, the CAW, under the leadership of Tom Kilpatrick, had made a secret deal with the company a
272 ~ Judy Korbin
few days before to settle the contract. Judi and I were in attendance at the deadline negotiations the night of the threatened strike. The meeting was held at the Delta River Inn in Richmond and we were privy to the information that CAW would cave in at the last minute, so by 11 p.m. we were fast asleep at the table showing no signs of stress! The CAW waited until past midnight Toronto time and after the first workers walked off the job to suddenly agree on terms with the company. Bill Farrall of the IAM along with his bargaining team were thunderstruck! I will never forget the scene in the parking lot early that morning when Bill was physically restrained from attacking Kilpatrick! Anyway, Judi Korbin and I joined the Board of PWA Corporation and were made to sign undated letters of resignation which were held by the company. They explained that this was a precautionary step taken to protect the company’s options if the employee/AMR deal collapsed. It made sense at the time but in retrospect it showed a total lack of trust. However Judi and I were neophytes to the business of corporate boards and went along with the process. In later years the Gemini case would become a much quoted teaching example of the duty of corporate directors to act in the best interests of the corporation. But in 1993, the Gemini case had not yet been heard so the prevailing belief on the part of employees and their union heads
Chapter 34 ~ It Was Never Easy ~ 273
within the CCAE was that their board representatives were obliged to act in the employee’s best interests. This included their insistence on being debriefed on all board meetings and getting full disclosure of board discussions. Judi and I were caught in the middle, knowing that it would be dangerous and illegal, in a public company, to share confidential inside information broadly (within the CCAE, it may have been questionable, but knowing how unions work, nothing remains a secret for very long). During 1993, the company was engaged in highly confidential negotiations with creditors, government bureaucrats and suppliers and Judi and I had lots of information that we could not pass on to the CCAE union leaders. Over time I suspect that this became a source of irritation and created some distrust. Management at CAIL attempted to bridge the distrust between themselves by convening high level working sessions for information sharing with union leaders: they hoped that this would lead to a more informed and engaged union leadership. It worked until it didn’t, as these things go and this was not the first time that they disagreed! Their acrimonious relationship had developed during the several years before 1992 when cut-backs and layoffs (along with demands for contract concessions by management) had led to entrenched positions such as that expressed in the CAW open letter. I suspect also that management had reached the end of their rope by the beginning of 1992 and could see no other way to scale back the financial resources devoted to paying the workforce than to agree to a merger with Air Canada.
274 ~ Gary Colter
In other words the relationship between labour and management at PWA/CAIL was broken and union leaders saw the employee investment plan as a way to get back on an even playing field. Alas, this was never to be and I told them so. I knew there was no appetite at AMR or within CAIL to share power with union leaders. I was not and still am not of the view that power can be shared when running a company although I strongly believe that ‘power sharing’ is not the answer. Objectives sharing and reasonable reward sharing works better every time. The problem was that objective sharing required honest dialogue as well as mutual listening and parking egos at the door! These were things that eluded the two sides; suspicion, distrust and blame for the dire circumstances of the airline would not subside. Having said that, however, as the year dragged on and Air Canada continued their war of attrition by their refusal to negotiate terms under which PWA/CAIL could withdraw from Gemini, the company once again edged closer and closer to insolvency in the fall of 1993. AMR had set a deadline for the deal to close but we couldn’t close if we were unable to de-host from Gemini. So it was that on October 19, 1993 Rhys Eyton sent a confidential memorandum to the Board and government observers that contained the following essential information: • Time was running out on PWA/CAIL
Chapter 34 ~ It Was Never Easy ~ 275
• Consensus of legal advisors was that legal avenues available to Air Canada would enable them to delay resolution of the Gemini issue until May1994. • Two serious consequences arose from the delay: 1) the expiry of the AMR agreement on December 31, 1993 and 2) a cash shortfall of $60 million on December 31, 1993. • Even if AMR were prepared to extend their deadline to mid-1994, we could require an additional $135 million of bridge financing after assuming the federal government would reinstate their $50 million guarantee and Alberta and BC would continue to make available their combined $70 million guarantees. The larger than expected cash shortfall was attributed to creditors such as oil companies requiring cash payments for purchases or for extending shorter credit terms. • A special restructuring committee headed by Gary Colter, Vice Chairman of KPMG, would develop a strategy to deal with the issues and Eyton and Jenkins would visit AMR to broach the subject of extending their deadline. • Legal advisors gave assurance that the best course of action would be to continue business as usual until the results of the competition tribunal were known and we had a sense of what political position a new federal government might take. (The federal election was taking place on October 25.)
276 ~ AMR agreement
Looking back, it is worth noting that during 1993 a lot of progress had been made in the key elements of the restructuring plan of PWA/CAIL at that time: 1. The employee investment plan had commenced and was fully under way. (Employees including those represented by CAW) had agreed to $200 million in wage reductions over four years commencing in early 1993. They had also agreed to extend their collective agreements for three years ending December 1995 with no general wage increases during that period. PWA would issue entitlements for the $200 million in connection with the $200 million wage reduction. These entitlements would mean that employees would receive 250 million common shares in PWA Corporation for their $200 million contribution and this would provide them with an estimated 24.9% basic and 18.7% fully diluted equity interest in PWA Corporation. 2. The Federal government loan guarantee of $50 million extended in late 1992 had been fully used and government observers were in attendance at our board meetings. 3. The Provincial government loan guarantees from Alberta and British Columbia were on standby and available. The company had earlier negotiated their availability extension from June 30, 1993 to December 31, 1993.
Chapter 34 ~ It Was Never Easy ~ 277
4. The haircut agreements by over 100 creditors were all but complete with the exception of seven creditors remaining to sign and these were not likely to de-rail. 5. Public shareholders of common and preferred shares as well as holders of convertible subordinated debentures and yen denominated perpetual debt as outlined in the July 27, 1993 “arrangement” had 96% approval and could move ahead. 6. Gemini hosting was at a stalemate 7. AMR agreement closing – awaiting the sooner of Gemini dehosting agreement or December 31, 1993. AMR would invest $246 million in voting and non-voting convertible preferred shares of Canadian Airlines International which would provide AMR with a 33.9% economic interest in CAIL. Given the precarious situation in which the company found itself in October 1993 the employees once again came to the assistance of their company through the CCAE. The CCAE, with the assistance of our legal and financial advisors, began work on a hitherto unknown or unheralded initiative to provide the company with at least a backstop alternative should no solution be found for the Gemini impasse: We crafted a confidential offer to the Board of PWA to undertake a “made in Canada” solution.
278 ~ Rhys Eyton
On November 23, 1993 the PWA Board’s Executive Committee met with the strategy task force held at the Calgary headquarters to deal with strategies and fall-back positions and, among other matters, progress reports on the status of Gemini negotiations and political initiatives to resolve the impasse between Air Canada and PWA. As part the agenda, I had arranged for the CCAE representatives (Captain John Dunlop, Roberto Sprugnoli, Gary Anderson, and legal advisor Marty Kovnats) to appear with me to present the employees’ fall-back plan. I stressed that the plan was a response to the Board’s request and not an unsolicited bid. This plan was not an offer but a refined outline of a plan and was incomplete as we had avoided discussion with governments and we had not lined up financing. But it was a plan backed by the Council unanimously and it had been exposed before hand to Gary Colter, the chairman of the strategy committee. The objective of the pre sentation was to make the Board aware there was a viable fall back plan. In summary, employees would provide a further $246 million instead of the AMR infusion outlined in their agreement. Employees would replace AMR’s rights with the assumption that the Sabre hosting deal could not be done until 1999 at the earliest and that the AMR marketing agreement would remain in place. It also assumed that governments would support a made-in-Canada solution and backstop the financing that would be necessary to raise the $246 million. The plan was
Chapter 34 ~ It Was Never Easy ~ 279
simply that the CCAE would invest in debentures at 4% cost to the company and these would be unsecured and mature in 2013. Employees would repay the loan over 20 years through 3.5% wage reductions commencing in 1997. The benefits and hence justification for the scheme were: 1) Lower interest cost to the company than the AMR deal, 2) No foreign investor which would appeal to a new federal liberal government, 3) No Gemini litigation so that we could reverse reserves for cost, 4) A more committed workforce and 5) Maximum minority interest in CAI capped at 33%, unlike the AMR deal. In presenting and discussing the employee fall-back plan, we stressed that there was a risk that this plan might be leaked to governments which would cause them to pursue this option rather than the AMR transaction which involved universal political risk to all parties. We also felt that a leak to AMR might cause them to misconstrue the CCAE as being unfriendly to them and finally an internal leak could be misinterpreted by employees as a takeover attempt by the employee council, which it wasn’t. At the conclusion of the presentation Mr. Eyton and members of the Executive Committee of the Board thanked the Council for its efforts and suggested that we continue working with Gary Colter to finetune the plan. Under the leadership of Rhys Eyton the company was multi-tasking on many different levels, as you would expect. While all this was
280 ~ Rhys Eyton
going on in the background, the Competition Tribunal issued a dissolution order on November 24, 1993 on Gemini. This order had a tight timeline that allowed the parties to reach their own alternative agreement within two weeks. Air Canada and Covia announced they would appeal the Tribunal’s order to the Federal Court of Appeal. On a separate track the federal government held multiple track negotiation meetings between the most senior management members of Air Canada and PWA/Canadian to try to resolve route network issues in such a way that peace could be had in the airline industry. None of these negotiations resulted in an outwardly miraculous solution. But the fix was in: in January 1994 the new federal Liberal government announced that Air Canada would be named second carrier to Japan and awarded the Canada/Osaka route but not the Canada/Tokyo route which would remain assigned to Canadian. By the end of January 1994 Air Canada quietly slipped into the background. Not surprisingly, the Vancouver to Hong Kong route was assigned to Air Canada as the second carrier a short few years later. On the surface it seemed that both airlines had slugged themselves into oblivion, each recording large losses in the $300 million range for 1993. The federal government seemed to have bought peace to the aviation industry, at least until the final chapter in 1999! The AMR transaction was completed on April 8, 1994 and the PWA/Canadian Airlines restructuring saga came to a successful but almost
Chapter 34 ~ It Was Never Easy ~ 281
anti-climatic conclusion. The CCAE back-up plan was shelved without fanfare. I would like to mention one more seemingly innocuous incident relating to my role as Chairman of the Employee Council. In early January 1994 I received several phone calls from Rhys Eyton in which he said that I should send the company my billing for services. He suggested I should charge in the range of $15,000 to $20,000 a month for my services from July 1992 until the end of 1993 because I had received no remuneration for my time and effort. I told him that I would not dream of charging for my time and that my efforts were purely altruistic and that I could not in good conscience receive compensation for monies foregone by employees. Rhys felt it was unfair for me to go un-remunerated when all the accountants and lawyers involved in the restructuring had cost the company in excess of $20 million. I did not pursue his request and he did not insist. 1994 was the first year in which compensation and remuneration for officers and directors was a requirement in public company annual reports and had I acquiesced to Eyton’s request to bill the company something in the order of $285,000 that item would have been highly visible to the employees who gave up their pay to see the airline through its travails. Unsuspecting as I was when I turned down the offer from Rhys, the airline was to pay deal completion bonuses to its senior management in 1994 which, when
282 ~ “Canada 125” Award
discovered by employees from reading the annual information circular, led to such a vitriolic outcry that senior management suffered an irreparable blow to their credibility. Years later Don Carty would himself be felled by the disclosure of retention bonuses to senior management at AMR during a particularly stormy period in that company’s existence. I have no regrets in not accepting compensation for my work with the CCAE although years later the Council ended up its coffers with a surplus of something like $25,000 which they donated in my name to the British Columbia Institute of Technology, Aviation Division, in Richmond. I didn’t even get a tax receipt for that! Finally, and tragically in my view, Rhys Eyton publicly resigned his position as Chief Executive Officer but agreed to stay as non-executive Chairman April 15, 1994. Even though I fully expected that would happen eventuality it surprised me that Don Carty did not wait longer to see off the person responsible for his departure as CEO of CP Air back in 1986.
Chapter 35 ~ The party at BC Place in December 1993 – a night to remember in my old age
A group of employees had been beavering away at throwing a big celebration party to mark the success of the employee investment plan. After an exhausting year and a half (since June 1992), the employees rented the Plaza of Nations at B.C. Place in downtown Vancouver and threw a party billed as “A Tribute to all employees of Canadian Airlines and their families for their courage, professionalism and determination and to the people of British Columbia, Alberta and Canada who stood by us during the tough times”. Unbeknown to me, they had arranged for me to be honored that evening with several big surprises. There was a big stage set up and according to newspaper reports the following day the Plaza of Nations was packed with enough people to fill a dozen B747’s. I thought I had been invited to a party but I didn’t expect to be presented with a “Canada 125” Award by Senator Pat Carney. The Award, a commemorative medal
284 ~ Dannie Panasiuk
marking the 125th year of the Confederation of Canada and whose creation was approved by Queen Elizabeth II, is presented to persons who have made a significant contribution to Canada, to their community and to their fellow Canadians. I am a very proud recipient of this award which is a sustaining reminder to me of my great years at a great company, filled with adventure, learning and challenges along with laughter and friendships that continue to this day. Someone had also commissioned an eight foot by five foot oil painting of me and there it was, framed and ready for hanging. I heard that it was hung at the entrance foyer of the Vancouver operations centre for a number of months before someone [7] objected to its presence. It was subsequently stored somewhere in the bowels of the hangar and eventually disappeared. Well, it was a nice thought but a little naive to expect that it would be tolerated as a permanent fixture when even our founder, Grant McConachie, never had a painting of himself hung up inside the entrance foyer of the building. I had one more surprise arrive that evening: I received a separate Tribute celebration present: an exclusive, original handcrafted pen set created from blackheart, birch and zebra woods and crafted by Dannie Panasiuk of Delta, B.C. This came with a note that said “On behalf of all the members of the CAW we thank you, Sid.” I am not sure if Bob
Chapter 35 ~ The Party ~ 285
White or Buzz Hargrove would have approved but it is a treasured memento for me. I also received a blown glass Canada Goose figure set on a block of white marble. It is traditionally given to retiring CALPA pilots and bears the following inscription: Captain Sidney Fattedad From the grateful pilots of Canadian Airlines For his vision and untiring leadership In the fight to save the airline August – December 1992
286 ~ Chair of the CCAE
Chapter 36 ~ Foresight is often regarded as crystal ball gazing……
Shortly after the AMR deal closed and my own homework on the future prospects of the airline was completed, I felt it incumbent on me as Chair of the CCAE to expose union leaders to a bleak future ahead. I knew that in order to compete realistically in the deregulated world, costs would have to come down much further if the airline were to succeed. In addition, the restructuring we had just completed did not provide much new capital to pay for the newer, more fuel-efficient fleet to replace the aging B737 fleet. I prepared a financial model that was vetted by our financial advisors before we presented conclusions to the CCAE. At a meeting held in Toronto in the summer of 1994 I spoke of the need for employees to forestall a further restructuring and/or downsizing within a few years. I pointed out that the government’s stealth settlement of the Gemini issue with Air Canada would mean our international route profits would suffer. AMR would discover that they could overfly Vancouver with long distance aircraft and avoid code sharing
288 ~ Gilles Dagenais
and therefore revenue sharing with us. However, in the euphoric time following restructuring union leaders (who were probably in the grips of wage-reduction fatigue) felt it would be unproductive to pursue any sort of pre-emptive employee scheme. I cannot say that I blame the union leaders for their reluctance to engage in more corporate engineering and so I let the matter rest. It was not long in coming (late 1995): a series of errors and changes in accounting estimates and forecasts resulted in the company declaring a huge loss of $195 million instead of an earlier projection of a $50 million profit. This was the beginning of a period of senior management house cleaning that began with the removal of my good friend Terry Francis, the Senior VP of Marketing and my compatriot in the border incident when we went down to pick up the Boeing 747-400 a few years earlier. Other officers were sacrificed: Ian Bootle, the chap who called me in Hong Kong in the middle of the night; Gilles Dagenais, who was a long time friend of mine from Amsterdam; Chris Nassenstein, the VP of Maintenance and a staunch supporter of the Quality movement in CAIL; Ted Ranson, a well-meaning officer who succeeded me as VP of the Pacific division in 1989; and finally Laura Safran whose father was a close friend of Rhys Eyton and a trusted psychologist whom Rhys relied upon to advise him on the characters of people in the company.
Chapter 36 ~ Foresight is Crystal Ball Gazing ~ 289
During the debacle of the missed forecasts and large losses a highly charged incident occurred after a particular board meeting. A press release had been approved which described the loss as a result of accounting misstatements relating to accounting of nett fares (commission kickbacks) in Asia. We were all caught up in the exercise of “explaining” the large variance and approved the press release as presented. After returning home from the meeting I had a chance to rethink the explanation and wrote Rhys Eyton a note to say that I had second thoughts about the release. I said that accounting mistakes didn’t “result” in losses, the losses were the result of excess capacity on the Asian routes whose losses had been masked by revenues that were overstated when commission kickbacks were not accounted for. I thought that the losses themselves were not being correctly explained to the public. Rhys obviously shared my concern with the other board members and I got a nasty shock when Bob Crandall’s office called me to say that AMR would consider legal action against me if I deviated from the press release explanation in communicating my feelings outside the board room. I declined to back down from my point of view and did communicate my opinion to the CCAE. This was not a case of being disloyal to the company, it was an issue of a correct attribution of the real reason for losses. I said that accounting errors in and of themselves cannot cause losses, they simply delay the recognition. The underlying cause is always a business decision.
290 ~ Bob Crandall
By early 1996 the serial missteps by Kevin Jenkins had taken their toll on the patience of the union leaders and rank and file. Among the lesser acknowledged missteps by management was the spending on highly visible renovations to management offices: This was not the best way to use monies contributed by employees and did not sit well with them. In addition, the management bonuses paid the year before had rankled employees and their unions. Judi Korbin and I were told in no uncertain terms that the union leaders within the CCAE were unanimous in wanting Jenkins’ resignation. We had tried to work with management to improve labour relations but in the end we had few qualms in signing a letter to the Board asking for a leadership review. This letter came after Judi and I had witnessed the ultimate show of non-confidence by AMR at the Christmas dinner before the Board meeting in December 1995.
Chapter 37 ~ Christmas dinner in a Crandall and Carty run airline
It remains stamped in my mind to this day. The Board members gathered before the Christmas dinner in December 1995 and chatted tensely about the gathering storm of bad and deteriorating financial results over the past quarter. I asked some of the board members whether they had heard any rumblings from AMR’s Carty or Randall about their continued support for the company. Harry Steele, who had taken over from Rhys Eyton as non-executive Chairman, said that the non-employee board members had expressed their continuing support for Kevin Jenkins and felt there was no need for a leadership review. When Don Carty and Bob Crandall arrived for dinner, they seemed pre-occupied and said little as we were being seated. As usual, senior vice presidents and the president (Jenkins) joined the board at board dinners and when everyone was seated, conversations around the table turned to the upcoming Christmas holidays and other small talk. As
292 ~ Barbara Amster
the entrée dishes were being replaced by the steak dinner, suddenly and unexpectedly, Bob Crandall said, “Mr. Chairman, could we have an in-camera session with board members only at this time?” “You want an in-camera session now and with board members only?” said Jenkins. “Yes now, and you are not included,” replied Crandall.
I watched in astonishment as Terry Francis, Kevin Jenkins and the other senior executives put down their cutlery and stood to leave. “We’ll be waiting outside.” said Jenkins. After their departure, Bob Crandall started by saying that he and Don Carty had had it “up to here” with Jenkins and they insisted that the board instruct him to take direction from Dallas. Apparently all was not well: the arrival of AMR senior officer appointees such as Barbara Amster during the year had created tensions and distrust among the senior management team as well as a tug of war as to who was calling the shots. Presumably Jenkins had bridled and this was not well received by Crandall. He went on to state that continued forbearance of losses
Chapter 37 ~ Christmas Dinner ~ 293
at CAIL was dependent upon the board’s reading Jenkins the riot act. I looked around the table to see if board members were going to react and, hearing no objection, I said “Does this mean that if we agree, AMR will give us the undertaking that they will remain committed to support CAIL financially?” I further suggested that such a decision might contravene foreign control rules. I was surprised and unhappy at the lack of response from Crandall to my question and made a note to speak to Judi about how we would deal with this incident in terms of our communication back to the CCAE. This was an in-camera conversation and would not be recorded. Also, it could be denied if disclosed. The moral dilemma was whether or not there was a secrecy issue surrounding the foreign control aspect of the discussion and as there had been no discussion or response to my question, we could not report a breach based on discussion. Twenty odd years later I suspect this point is still moot now but at the time, it was clear in my mind that AMR had exercised undue control over CAIL and as such they owed the company more than contractual loyalty.
294 ~ Kevin Benson
Chapter 38 ~ The end of my involvement
“The Party’s over. It’s time to call it a day. They’ve burst your balloon And taken the moon away. It’s time to wind up the masquerade. Just make your mind up, the piper must be paid” …..Nat King Cole
Well, as in all nightmares you wake up, give yourself a shake and go on with the rest of your life. So it was that I found myself in 1996 continuing to witness the signs of yet another round of restructuring, except that this time it was led by Kevin Benson, the chap who replaced Kevin Jenkins. Benson was a nice guy with a penchant for fast cars (the Indy kind) and he was respected by employees at Canadian Airlines as being a straight shooter and someone they could trust to tell them the truth. But the truth was still harsh and the realities of an aging fleet combined with undercapitalization and an obsolete cost structure, the company was once again being forced onto the proverbial financial rocks. So once again, on November 15, 1996, the board of CAIL was forced to retreat into the safe haven of PWA Corp. to avoid personal liability.
296 ~ Transport Minister David Anderson
I said to Judi Korbin, “I am not going to do that. I am going to resign, period.” I communicated my decision to the CCAE and handed over the keys, so to speak, to the union leaders. The following year saw yet another debt deferral exercise led this time by Benson. Also employees agreed to take a sizeable pay cut. This happened only after Transport Minister David Anderson and Industry Minister John Manley threatened to force a CAW vote in order to get all the employees into the lifeboat of wage cuts. Buzz Hargrove’s reluctant endorsement of the pay cut agreement was a sight for sore eyes. The irony of Joss [1] once again revealed itself in this episode: A full circle once again had come to pass: Minister David Anderson was an ex KGV schoolboy from Hong Kong! While all this was going on I kept reminding myself, “Don’t say ‘I told you so!’” as I remembered the time a few years earlier when I approached the CCAE union leaders at a Toronto meeting to consider further productivity improvements in contract language as well as wage reductions in exchange for investment in the company.
Chapter 39 ~ To our customers
A book about Canadian Airlines would not be not complete without some discussion on the raison d’etre for its existence: our customers. I recall many interactions with our customers. Some were funny, others touching. They were always informative. I believe that customer loyalty exists only in the absence of a better alternative. If a competitor can provide the same service or product at a lower price and better perceived value, the likelihood of keeping the customer diminishes. This is not to say that all customers are fickle, but the truth is that everyone paying for something is looking for more than just value for his money. The relationship between a loyal customer and an airline is an intricate fabric woven consisting of almost tangible feelings and the myriad interactions, human and otherwise, between the two.
298 ~ Dr. S. Nandy
Coincident with my appointment to the position of Senior Vice President of Customer Services in 1989 the airline was experiencing a surge in customer complaint letters. I made it a daily routine to ask for samples of customer complaint letters, especially from frequent flyers, and I would conduct a “deep dive” analysis of them to find out the root cause issues that led to the complaints. One particular customer complaint was from a Dr. S. Nandy who was a Gold level frequent flyer. His complaint involved a series of mishandled connections and flights resulting in missed meetings and a lot of inconvenience. The item that caught my eye, however, was his disgruntled reference to receiving a slip of paper at an airport service counter - it was a pre-printed customer complaint slip that provided the mailing address of the customer service department. Dr. Nandy said that this gave him the feeling that staff were not only unable to resolve problems for customers but they were also indifferent to them. All they said was, “Write head office”. I realized two things on reading this complaint letter: (1) those complaint slips were being used by service personnel to deflect unhappy customers instead of trying to resolve their issues on the spot (which usually takes more time). This would explain the surge in complaints that we were receiving. I discussed this with Ernie Caron, Vice President of Airport Operations, and he immediately realized that this was a service no-no and went about having those complaint slips removed. (2) I realized from Dr. Nandy’s letter that we were not going to be able to retain his
Chapter 39 ~ To Our Customers ~ 299
loyalty unless I personally convinced him that we had learned something from his input. I phoned him at his practice in Medicine Hat and said I would like to have thirty minutes of his time the next morning if he would meet with me at his office. He said, “If you come, I will see you”. I took the first flight out of Calgary to Medicine Hat the next morning and was waiting at his clinic at 9 a.m. He was quite amused and said that never in his wildest dreams did he expect the Senior VP of CAIL to turn up to deal with his complaint. I explained to him that we had learned a useful lesson based on his input and I wanted him to be an advisor to me by sending me observations and suggestions from his future flights. Dr. Nandy practiced psychiatry and he told me that this was unexpected behavior from a senior officer of a large airline and he asked me why I would spend my precious time to come to Medicine Hat to see him. I said, “No letter can convey the sincerity of my apology and my request for you to be my eyes and ears in the field can only be done in person”. Dr. Nandy is still a friend to this day. Another of my routines as head of customer services was the monthly luncheon that I held for the top frequent flyers and corporate accounts in Vancouver and Toronto. Attending these luncheons would be top senior officers of big corporations including IBM, forestry companies etc., and these luncheons would be held not in hotels or private clubs but in makeshift dining rooms in the flight kitchens at airports. Our guests would arrive at 11:30 a.m. and be taken for a tour of the flight kitchen.
300 ~ Our loyal customers
Lunch would be served at 12:15. [Typically there would be eight to ten top frequent flyer customers, the sales directors of cities and management of airport services and in-flight and maintanance services.] During lunch (which was usually the business class meal being served on our flights that day) I usually said a few words thanking the guests for attending and then I would ask them to feel free to provide their observations, suggestions and complaints about our services both at airports and in-flight. I can say with some certainty that those conversations were extremely valuable for our management staff and I received many letters from those top frequent flyers that they felt we genuinely listened to their input. Personally I learned from this exercise that talking to customers as a multi-functional team produces important cross- functional synergies. Sometimes these luncheon discussions proved uncomfortable for the airline management teams present. It was just plain hard to explain why someone on a flight to Shanghai had his bags tagged to Toronto. Generally the atmosphere of these conversations was congenial and useful by providing systemic fault feedback to line management. Finally, this chronicle of Canadian Airlines would not be complete without a very special mention and salute to all of its loyal customers throughout its history. I know there are literally tens of thousands of those customers who still wish to this day that Canadian Airlines or CP Air were still flying.
Chapter 39 ~ To Our Customers ~ 301
In today’s aviation industry customer/airline interactions are multifold and include technology interfaces (online booking and ticketing) as well as human interfaces (check-in, boarding, in-flight and baggage delivery on arrival plus the occasional post flight surveys and mileage statements). The many possible points of contact provide ample opportunity for Murphy’s Law to strike! It is no wonder that more and more air travelers are disgruntled or aggravated in some way by the small and sometimes big things that can go wrong.
302 ~ Vancouver, British Columbia
Chapter 40 ~ In retrospect and some final thoughts ……..
When I boarded that Empress DC8-63 aircraft in Hong Kong on March 17, 1968 with the US $400 that my dad put in my pocket just before I went through departure immigration, I truly had no idea of the adventure that awaited me in Canada. I never realized what a wonderfully rewarding life the country and its people had in store for me. During the 45 years that I have lived in Vancouver, British Columbia, I have had the privilege to experience travels to far off places in the world – but I have always looked forward to coming “home”. I know every square mile of the landscape looking down from the aircraft window no matter which direction the plane is approaching from – the mountains to the north, Boundary Bay to the south, Fraser valley to the east and Georgia Strait to the west. I have the fondest memories of my time at Canadian Airlines and have made many friends in the process. I have been given the opportunity to learn, to grow and to apply
304 ~ Westjet
knowledge as well as the freedom to make mistakes as well as achieve successes in a country I consider myself lucky to be counted as a citizen. I have made many friends along the way in all walks of life and have enjoyed the journey without too many regrets. Among the few regrets that I have, I would say that the eventual merger of Canadian Airlines International with Air Canada was the most disappointing. That merger did not bring about the solution to Canadian aviation that many expected. Air Canada is today still saddled with the legacy of unsustainable economic compromises made between airline management and unions representing airline workers back in the days when the business model was simply to put planes in the air and charge customers the cost of operating plus a bit. Consider the fact that Air Canada earned total revenues of $12.1 billion in 2012 and reported an operating income of $297 million or just 2.4% operating margin compared to Westjet’s total revenues of $3.4 billion and operating profit of $371 million for an 11% operating margin. The operating margin difference simply means that Westjet’s cost structure is about 8% lower than Air Canada’s. One begins to realize why Westjet’s shareholders placed a value of $2.8 billion (as measured by the market capitalization of Westjet in August of 2013) on that company while Air Canada’s market valuation by the same measure was
Chapter 40 ~ In Retrospect ~ 305
$760 million, just a quarter of the value of Westjet. Imagine an airline with four times the revenue of its closest competitor being valued at just one quarter of that competitor by the stock market! This is not rocket science and anyone that cares to look will realize that the capital markets factor in the relative cost and profit competitiveness metrics into company stock prices and it should serve as the signpost for Air Canada management and union leaders to guide them as they steer the company in its quest for survival. Meanwhile, Westjet enjoys the advantage of having a lower cost structure and hopefully avoids the past mistakes of the legacy airlines when managing its cost structure. The world of aviation continues to evolve today. The new players that are becoming globally dominant are rich and well capitalized airlines such as Emirates, Qatar and Etihad. These airlines have the luxury of being able to focus on superior service at structurally lower costs by virtue of their labour cost arrangements and superior financial resources. One recent study commissioned by the Gulf Cooperation Council predicts that the Gulf region will see 250 million passengers using its airports each year by 2020. The study titled, “The World Via Gulf,” also notes that in the next seven years the three Gulf airline majors will collectively operate two-thirds of the world’s youngest aircraft. Dubai’s airport officials say that passengers through Dubai International will overtake that of London Heathrow in 2015.
306 ~ Legacy Carriers
Anecdotally, the world will continue to change in service offerings. There will continue to be demand for the ultra luxury travel classes by the one percent but increasingly the physical challenges on the world’s aging population will mean that travelling in sardine can conditions will no longer be attractive. More and more I hear the grumblings of travelers forced into the hub and spoke world of legacy carriers and given any alternative, they would jump at direct flights. This will mean that carriers that can discern the true origin and destinations of future travelers may be able to dismantle the hub fortresses and use aircraft designed to provide range and capacity to overcome the shackles of the hub and spoke system. I am not naive enough to think that the aviation industry can return to the once glamorous status that it held in the early days of passenger flight but I do harbor a hope that a different business model for aviation can be found whereby the harmful effects of long distance travel in compressed cabin air and pressure environments can be reduced and airport congestion and delays can be alleviated. The most obvious practices of air travel that have not changed for decades are the airport check-in and boarding processes and these await the creative ideas of someone not in the air travel world to suggest much needed innovations. Finally, I’d like to leave you with this thought: Is there anything better than travelling? It is the one true activity of human kind that
Chapter 40 ~ In Retrospect ~ 307
connects people and economies, opens up individual horizons and expands cultural diversity. With this in mind, keep this higher noble vision in mind when you trudge in to work. It helps.
308 ~ Workers Compensation Board of British Columbia
Post Script.
After I took leave from my involvement with the airline industry, I embarked on yet another rewarding and successful career – in the world of institutional investing. I had accepted the position of Chief Financial Officer of the Workers Compensation Board of British Columbia in November 1993 and immediately after that I was appointed the Chair of the Investment Committee of that organization. Although this career spanned another 14 years until the end of 2007 when I finally retired at the age of 63, I am not tempted to write any memoirs of my experiences in the worker’s compensation system of British Columbia and Canada, not because it was not filled with “interesting times” but because the 20 year breathing room required for objective recall will see me well past my sell by date by the time 2027 rolls by! In 1999, I joined the Board of the British Columbia Investment Management Corporation (bcIMC) and subsequently became Chair of that
310 ~ Canadian Insurance Company
Corporation from 2008 through 2011 when my tenure on the board exceeded newly minted maximum term limits. bcIMC has just over $100 billion under management as of March 2013 and is ranked the fourth largest Pension Fund Investor in Canada. In 2007, I was recruited to sit on the Board of Industrial Alliance Pacific, subsidiary of Industrial Alliance Insurance and Financial Services, a publicly traded Canadian Insurance company based in Quebec City. I was Chair of the Audit Committee of IAP. We merged IAP with its parent company in 2012 and my involvement with the insurance industry ended. In these my autumn years, I have more time to enjoy the better things in life – spending time with my family and playing golf as often as I can which sometimes can be four or five days a week! I was recently diagnosed with Parkinson’s Disease in 2012 and with the aid of medication, I have been lucky so far to escape with minimum discomfort and disability. Time will tell where that journey takes me, but in the meantime, I spend my time being grateful and happy for the life I have lived so far and staying in the moment every time I experience happiness which is more often than not.
Notes Chapter2 1. Concerning Joss Rudyard Kipling “Destroyers at Jutland” “And Joss, which is luck, fortune, destiny, the irony of Fate or Nemesis, is the greatest of all the Battle-gods that move on the waters. As I will show you later, knowledge of gunnery and a delicate instinct for what is in the enemy’s minds may enable a destroyer to thread her way, slowing, speeding, and twisting between the heavy salvoes of opposing fleets. As the dank-smelling waterspouts rise and break, she judges where the next grove of them will sprout. If her judgment is correct, she may enter it in her report as a little feather in her cap. But it is Joss when the stray 12-inch shell, hurled by a giant at some giant ten miles away, falls on her from Heaven and wipes out her and her profound calculations. This was seen to happen to a Hun destroyer in mid-attack. While she was being laboriously dealt with by a 4-inch gun something immense took her, and—she was not.
312 ~ Rudyard Kipling
Joss it is, too, when the cruiser’s 8-inch shot, that should have raked out your innards from the forward boiler to the ward-room stove, deflects miraculously, like a twig dragged through deep water, and, almost returning on its track, skips off unburst and leaves you reprieved by the breadth of a nail from three deaths in one. Later, a single splinter, no more, may cut your oil-supply pipes as dreadfully and completely as a broken wind-screen in a collision cuts the surprised motorist’s throat. Then you must lie useless, fighting oil-fires while the precious fuel gutters away till you have to ask leave to escape while there are yet a few tons left. One ship that was once bled white by such a piece of Joss, suggested it would be better that oil-pipes should be led along certain lines which she sketched. As if that would make any difference to Joss when he wants to show what he can do! Our sea-people, who have worked with him for a thousand wettish years, have acquired something of Joss’s large toleration and humor. He causes ships in thick weather, or under strain, to mistake friends for enemies. At such times, if your heart is full of highly organized hate, you strafe frightfully and efficiently till one of you perishes, and the
NOTES ~ 313
survivor reports wonders which are duly wirelessed all over the world. But if you worship Joss, you reflect, you put two and two together in a casual insular way, and arrive—sometimes both parties arrive—at instinctive conclusions which avoid trouble.” Extract from Rudyard Kipling’s “Destroyers at Jutland”
Chapter 14 2. On-time performance is the percentage of flights that depart on schedule. Chapter 16 3. The right to carry a passenger originating in Thailand to a country other than Canada. Chapter 17 4. The bomb was placed on the aircraft by the same people who placed the bomb on the Air India flight that left Toronto on the same day and perished over the Atlantic. Chapter 26 5. Tuk tuks are motorized rickshaws, so named because of their engines.
314 ~ Bill Stinson
6. Elliott Ness - American Prohibition agent. Head of the ‘Untouchables.’ Chapter 35 7. I had requested the painting be removed.
APPENDIX I - Letters
316 ~ John Major
APPENDIX ~ 317
318 ~ Rick Hanlon
APPENDIX ~ 319
320 ~ Tony Buckley
APPENDIX ~ 321
322 ~ David McLean
APPENDIX ~ 323
324 ~ Tony Buckley
APPENDIX ~ 325
326 ~ Barry Sheehy
APPENDIX ~ 327
328 ~ Wayne L. Naughty F.C.A.
APPENDIX ~ 329
330 ~ Rhys Eyton
APPENDIX ~ 331
332 ~ John Major
APPENDIX ~ 333
334 ~ Glossary
GLOSSARY BRAC - Brotherhood of Railway & Airline Clerks CAAC - Civil Aviation Administration of China CALPA - Canadian Airline Pilots Association CAST - Canadian Airline Simulator Technologists CAW - Canadian Airport and Passengers Union CALFA - Canadian Airlines Flight Attendants CADA - Canadian Airlines Dispatchers Association CTC - Canadian Transportation Commission. Government department that oversees air and railway regulation CCAE - Council of Canadian Airlines Employees FASB - The Financial Accounting Standards Board (FASB) is a private, not-for-profit organization whose primary purpose is to establish and improve generally accepted accounting principles (GAAP) within the United States in the public’s interest.
336 ~ Gemini
Galileo - traces its roots back to 1971 when United Airlines created its first computerized central reservation system under the name Apollo. During the 1980s and early 1990s, a significant proportion of airline tickets were sold by travel agents. Flights by the airline owning the reservation system had preferential display on the computer screen. Due to the high market penetration of the Sabre and Apollo systems, owned by American Airlines and United Airlines, respectively, Worldspan and Galileo were created by other airline groups in an attempt to gain market share in the computer reservation system market and, by inference, the commercial airline market. Galileo was formed in 1987 by nine European carriers -- British Airways, KLM Royal Dutch Airlines, Alitalia, Swissair, Austrian Airlines, Olympic, Sabena, Air Portugal and Aer Lingus. Gemini - In 1987, Air Canada and Canadian merged their computer reservations systems to form Gemini. Upon the merger, Gemini, Air Canada and Canadian entered into an agreement (the “hosting agreement”) giving Gemini the exclusive right to manage Air Canada’s and Canadian’s internal reservations systems. According to the various agreements between the parties, the first opportunity for Canadian to terminate its management arrangement with Gemini would have arisen in 1999. In 1989, the parties entered into another hosting agreement when a new partner, Covia, joined Gemini.
GLOSSARY ~ 337
INS - An inertial navigation system (INS) is a navigation aid that uses a computer, motion sensors (accelerometers) and rotation sensors (gyroscopes) to continuously calculate via dead reckoning the position, orientation, and velocity (direction and speed of movement) of a moving object without the need for external references. It is used on vehicles such as ships, aircraft, submarines, guided missiles, and spacecraft. IPO - Initial Public Offering MEC - All Local Council Presidents from the same airline form a Master Executive Council (MEC). The MEC elects a President, Vice President and Secretary-Treasurer for three-year terms, and handles negotiations and other business affecting Members at that airline. NTA - National Transportation Agency SABRE - Sabre Global Distribution System (GDS), owned by Sabre Holdings, is used by more than 350,000 travel agents around the world with more than 400 airlines, 100,000 hotels, 25 car rental brands, 50 rail providers and 14 cruise lines. The Sabre GDS enables companies such as American Airlines, American Express, BCD Travel, Carlson Wagonlit Travel, Hogg Robinson Group (HRG), Expedia, Frontier, Holiday Autos, Zuji, LastMinute,
338 ~ SOCC
JetBlue, GetThere and Travelocity to search, price, book, and ticket travel services provided by airlines, hotels, car rental companies, rail providers and tour operators. SOCC - American Airline’s System Operations Control/Flight Dispatch Office. This facility houses the command centers for one of the world’s largest airline. This multi-million dollar high tech facility has many similiarities to NASA’s Mission Control complex in Houston, Texas. All of the American’s flights world-wide are tracked and monitored here, using state of the art Flight Planning & Tracking computers and Satellite communications systems. Many Airline Flight Dispatcher Training Center graduates are now working in this facility. Aircraft Boeing family B737-200 B727 B747-200 B747-400 McDonnell Douglas family DC6 DC8-55 DC8-63 DC10-10 DC10-30
Primary missions Transcontinental, trans-border, charter Transcontinental, trans-border International International – non-stop long range Pre jet-age International International with more cargo capacity International Transcontinental International long range
Index
A A310 263 airbus 320 168 Air Canada 12, 50, 63, 69, 71, 77, 98, 101, 107, 123, 124, 125, 127, 129, 150, 172, 223, 224, 225, 238, 244, 246, 247, 249, 250, 252, 256, 261, 263, 264, 266, 270, 275, 278, 280, 304 Aitken, Brent 240 Allchin, Peter 73, 74 Allegis Corporation 119 Allen, Bruce 30, 40 American Airlines 98, 117 AMR 118, 119, 124, 221, 228, 231, 237, 238, 244, 245, 250, 252, 253, 255, 256, 263, 266, 267, 272, 274, 275, 277, 278, 279, 280, 287,289, 290, 293 Amster, Barbara 292 Amsterdam 38 Anderson, David 296 Anderson, Gary 278 Anderson, Orly 28 Arpey, Gerard 232 Attache brand 128 Auckland, New Zealand 38, 194, 198 Australia 114, 145, 161, 164, 197
B B737 128, 202, 287 B747 57, 58, 59, 119, 135, 136, 162, 174 B747-200 119, 120 Baker, Bob 24 Banff 64 Bangkok, Thailand 16, 129, 164, 168, 171, 181, 187, 194, 197, 199, 201, 203 Bangladesh 81 Barker, Peter 178 Basirin, Frank 105, 106 Bata, Thomas 48
BCIMC (British Columbia Investment Management Corporation) 190 Beadle, Warwick 184 Beaton, Brian 262 Beccles 76 Becket, Ian 184 Beijing 169, 170, 195 Benson, Kevin 295 Bentley, Peter 48 Berney Arms 76 Bhatia, Rahul 16, 168 Bidlake, John 178 Binder, Joe 93 Boat Crew 73, 74, 76, 77 Boeing 727 48 Boeing 737 48, 52, 180 Boeing 737-200 126 Boeing 747 50, 56, 70, 117, 119 Boeing 747-200 52 Boeing 747-400 216, 217, 288 Boendgen, Regina 95 Bootle, Ian 144, 146, 288 Bowen, Myra 81 Braniff International 63, 68 Bretischer, Henry 84, 98, 140 Brewster Transport and Tours 114 British Airways or BOAC 69 British Columbia Investment Management Corporation (bcIMC) 309 Brotherhood of Railway and Airline Clerks (BRAC) 35, 54 Buckley, Tony 17, 161 Buenos Aires, Argentina 38, 83 Burbidge, Fred 107 Byrne, Terry 40, 41, 42
C CAAC 171, 172 CADA 237 CAIL 12, 13, 14, 16, 17, 152, 153, 155, 156, 165, 167, 168, 169, 170, 174, 191, 195,
340 ~ Index
197, 202, 208, 215, 216, 219, 220, 224, 225, 228, 231, 236, 240, 246, 247, 249, 250, 251, 258, 259, 264, 269, 270, 273, 274, 276, 277, 293, 295, 299 CALFA - flight attendants 227 Calgary 209, 210, 211, 234, 239, 299 CALPA (Canadian Airline Pilots Association) 223, 227, 229, 230, 285 Campbell, Dale Marie 215 Campbell, Gordon 264 Canada 125 Award 283 Canadian Airlines 14, 130, 225, 244 Canadian Airlines International (CAIL) 151 Canadian Pacific Airlines 20, 24, 25, 32, 33, 35, 37, 38, 49, 142 Canadian Pacific Railway (CPR) 49 Canadian Transportation Commission (CTC) 69 Canal du Midi 17 Canavia Aviation Consultants 126 Carney, Pat 283 Caron, Ernie 298 Carty, Don 117, 121, 123, 125, 129, 139, 142, 143, 179, 220, 223, 231, 232, 271, 282, 291, 292 CAST - Simulator Technologists 227, 237 Castlegar 48 Catania Airport 87 Cathay Pacific 30, 120, 163, 171 CAW - airport and passenger agents 227, 243, 245, 250, 251, 252, 253, 254, 256, 258, 259, 271, 272, 276 CCAA 242 CCAE 232, 233, 236, 237, 238, 239, 240, 247, 250, 258, 262, 266, 267, 271, 273, 277, 278, 279, 281, 282, 287, 289, 296 CCAE/AMR proposal 265 CGA 39, 84 Checker, Chubby 23 Cheung, Linus 163 China 129, 169, 170 Chretien, Jean 187, 248 Cifuentes, Raul 94, 95 Clark, Joe 186, 187
Colter, Gary 275, 278 Coltishal, England 76 Colussy, Dan 72, 98, 99, 101, 108, 109, 123 Colussy, Helene, Mrs. 109 Conquistadores 77 Cotter, Dan 178 Covia 280 CP Air 12, 39, 47, 48, 49, 51, 52, 55, 58, 64, 65, 68, 72, 74, 75, 79, 80, 81, 85, 88, 90, 99, 100, 102, 105, 107, 108, 111, 117, 123, 124, 125, 127, 130, 132, 141, 142, 147, 155, 193, 199, 212, 219, 271, 282 CP Air Holidays 90, 105 CP Air Operations Centre 50 CP Hotels 102, 113, 140, 210 CP Limited 49, 84, 85, 97, 99, 100, 102, 107, 139, 144 Cranbrook 48 Crandall, Bob 118, 289, 291, 292 Crawford, Jack 83, 100, 101, 111, 189 Currie, Dennis (Captain) 202
D Dagenais, Gilles 288 Dakin, Ken 72, 87, 88, 99, 111, 176 Damgaard, Adrianne 80 Davis, Patti Reagan 195 DC1 174 DC10 117, 119, 120, 121, 135, 162, 174, 208 DC10-30 119, 120, 136 DC 6 45 DC8 50, 58, 201 DC8-63 43, 303 Descurtins, Cecilia 233 Dewhurst, Mr. 21 Dickie, Elaine 36 Dodd, Art 35, 36, 39, 54 Don Muang Airport 16, 171, 201 Dorsey, Jim 268 Dr. S. Nandy 298, 299
INDEX ~ 341
Dubai International 305 DuFresne, Ted 202, 203 Duggan, Barry 179 Dukelow, Mike 74 Dunlop, John 228, 230, 233 Dunlop, John (Captain) 223, 236, 242, 262, 278 Dye, Ken 268
Fort Nelson 83 Fort St. John 83 Francis, Terry 149, 174, 182, 191, 211, 216, 217, 219, 288, 292 Frankfurt 95 Fullerton, Roy 165, 184, 199 Fusco, Fulvio 87, 95
E
G
Eastern Provincial Airlines 12, 101, 103, 110, 123 Ebel, Greg 262 Emirates Airline 305 Empress of Hawaii 38 Etihad Airlines 305 Europe 129 Everett, Washington 217 Expo 86 269 Eyton, Lynn 180 Eyton, Mr. & Mrs. 193 Eyton, Mrs. 181 Eyton, Rhys 17, 125, 142, 145, 150, 151, 157, 181, 183, 203, 209, 214, 247, 257, 263, 265, 274, 279, 281, 282, 288, 289 Eyton, Rhys and Lynn 200
Galileo system 168 Gander, Newfoundland 103 Gatwick Airport 90 Gemini 12, 243, 246, 247, 267, 272, 274, 278 Genereux, Bill 51 Glass, Ian 90, 92 Glenfiddich 88 Goodman and Carr 235 Gordon Capital 242, 243 Graves, Maree 92, 197 Gray, Ian 67, 68, 69, 71, 98 Grayston, Kevin 151 Great Yarmouth, England 76 Guilin, China 20
F
Haight Ashbury 41 Halifax 103 Halsey-Brandt, Greg 264 Han, Freddie 32 Haneda airport 24, 28 Harcourt, Mike 269 Hargadon, Harry 90, 92, 162, 184, 196 Hargrove, Buzz 285, 296 Harris, Hollis 246 Hawaii 165 Heinmiller, George 179 Henry, Father 80 Herman’s Hermits 30 Hewitt, Bev 211, 233, 234 Hill, Ed 54
Farrall, Bill 88, 89, 188, 229, 230, 231, 232, 233, 236, 242 FASB 137 Fattedad, Sammy 71, 72, 176 Fattedad, Sid 179, 285 Fiji 145, 173 Filmon, Gary 247 Financial Accounting Standards Board (FASB) 135 Fisk, Judy 37, 75 Fitzpatrick, Ross 248 Five Man Cargo 29, 175 Flying Tiger 118, 119 Forbes, Jim (Captain) 43, 201
H
342 ~ Index
Hong Kong 21, 23, 24, 26, 27, 29, 31, 32, 36, 40, 41, 54, 91, 92, 109, 119, 121, 129, 140, 145, 150, 162, 164, 167, 171, 183, 194, 196, 198, 280, 303 Hong Kong Country Club 36 Honolulu 25, 38, 45, 145, 161, 199 House of the Rising Sun 76 Huisman, Dick 106 Huscroft, John 33
I IAM 88, 89, 227, 229, 230, 243, 251, 252, 253, 262, 271, 272 IAMAW 55 Imperial University 91 India 167 Indigo Airways 168 Industrial Alliance Pacific 310 Inertial Navigation System 43 Initial Public Offerings (IPO’s) 119 Interglobe Indi 168 IPO 125, 135, 139 Israel 129
J JAL 162 Janovcik, Peter 252 Japan 64, 71, 113, 114, 119, 120, 129, 131, 145, 161 Japan Airlines 194 Japan Civil Aviation Bureau 194 Jenkins, Kevin 17, 140, 143, 208, 212, 220, 221, 247, 290, 292, 295 John Leslie Award 188 Johnson, Beth 264 Johnston, Dick 264 Jyugaoka, Tokyo 69
K Kai Tak Airport 15, 19, 20, 121, 196, 216 Kaplan, Ken (Captain) 46, 201 Kaplan, Ken (FO) 43 Karachi, Pakistan 38
Kato 74 Kelowna 48 Keys, T. Second Officer 43 Khan, Stephen 221 Kilburn, Tove 81 Kilpatrick, Tom 257, 271 King George V School (KGV) 22 Kinks 23 Kipling, Rudyard 311 Kontinentals 23, 28, 163, 175 Korbin, Judi 271, 272, 290, 296 Kovnats, Marty 235, 236, 278 Kowloon 22 Kowloon, Hong Kong 222 Kowloon Bay 19 Kowloon City 19 Kowloon Tong 21 Kowloon Tong Club 21 Kowloon Tong School 21 KPMG 25, 26, 31, 32, 34, 275 Kremlin 97, 98, 103, 123, 139 Kwan, Nancy 21
L Laishley, Gerald 28 Laker 63 Laker Airway 68 La Quinta, California 248 Lasseter’s Den 30 Lasseter, Bill 30 Lee, Bruce 22 Lima, Peru 38, 81, 94 Lisbon, Portugal 38 London, England 90, 105, 129 London Gatwick 106 Lowe, Harvey 30 Loy Krathong 204 Lulu 23 Lung, Marcus 27
M Machinist Union (IAMAW) 54
INDEX ~ 343
Madrid, Spain 38 Major, Helen 180 Major, Jack 181, 183, 199, 203 Major, Jack and Helene 193, 200 Maloney-Hand, Diane 262 Manley, John (MP) 261, 296 Mann, Manfred 23 Manning, Gerry 178 Marco Polo Night Club 30 Mazankowski, Don 262 McCauley, Bill 237 McDonnell, John 126 McDonnell Douglas 57 McKenzie, Scott 41 McKinsey & Co 107 Medicine Hat 299 Melbourne 184 Melidones, Jimmy “the Greek” 17, 73, 75 Merritt, B.C. 42 Metzger, Franz 16, 133 Mexico 83 Miles, Jack 164, 184 Milken, Michael 145 Minneapolis 51 Monreal, Clara 80 Montreal 63, 97, 123 Morrison, Nina 81 Moynham, Jim 3 Mulroney, Brian 215, 216 Murphy, Dave 83, 100, 101, 123, 179, 189, 211
N ‘night of the long knives’ 99 Nandi, Fiji 38, 194, 198 Nandi Airport 171, 173 Narita Airport 16, 132, 133, 161 Nassenstein, Chris 208, 288 National Transportation Agency (NTA) 267 Nauru, Island of 126 Nelson, B.C. 48 Nelson, Larry 159, 170, 184, 202 Nelson, Paul 179 Nelsson, Anders 23
Nesbitt Thompson 121 Newark, N.J. 90 New Zealand 145, 161 Nicol, Bruce 151 Nordair 12, 123, 124, 219 Norfolk Broads 17, 74, 75, 76, 176, 177, 220 Northwest Airlines 51, 69 Norwich, England 74, 76
O O’ Brien, Cy 99, 189 Oasis Hong Kong Airlines 167 Ogden, Ed 70 Order of the Salmon 259 Ottawa, Ontario 64 Oulton Broad, England 76
P Pacific Excellence Program 170 Pacific Western Airlines (PWA) 48, 142 Pakistan 120 Pakistan International Airlines (PAL) 119, 135 Pan Am 69, 117 Pan American World Airways 98 Panasiuk, Dannie 284 Paris Air show 168 Pastuszynski, John 70, 87, 114, 179 Patton, Chris 215, 216 Peat Marwick Mitchell and Co. 24 Peiffer, Kurt 179 Penn, Ron 95, 96 Peoples Express 63, 68, 90 Peru 83, 94 Piry, Danny 24, 28 Plaza of Nations 283 Point Roberts 29, 203 Pope, Barbara 180, 182 Pope, Keith 114, 164, 184 Pope, Keith and Barbara 197
344 ~ Index
Price Waterhouse & Co. 136 Prince George, B.C. 48 Prince Rupert B.C. 48 Pump House 73, 74 PWA 12, 102, 125, 135, 136, 139, 140, 141, 143, 145, 146, 151, 152, 159, 164, 197, 198, 200, 202, 212, 219, 221, 245, 250, 262, 278
Q Qantas 174 Qatar 305 Qatar Airlines 305 Quality” movement 207 Quality movement 171, 210, 212 Quality program 165
R Rabuka, Colonel 174, 181, 198 Randall, Bob, Sr. 80 Ranson, Ted 210, 288 Read, Marie 36 Reddy, Vince 271 Regis, Letty 159 Richardson, James 33 Richardson Securities 32 Riley, Tony 82 Rome, Italy 86
S SABRE 124, 258, 267 Safran, Laura 288 Salman, Terry 121 San Francisco 41, 45, 83 Santiago 38, 83 Sato, Kaz 64, 112, 114, 115 Shanghai, China 169, 171, 183, 194 Sharp, Ralph 164 Sheriff of Patpong 205 Shetzen, Ted 119, 127, 128, 129, 132, 179 Shields, Goepel 235 Shields, Ken 235
Shing, Li Ka 197 Sicily, Italy 87 Sigler, Murray 142, 143, 151, 152, 208, 220 Sinclair, Ian 48, 98, 99 Singapore 83, 129, 145 Skeith, Al 40 Skene, Wayne 14 Sky Bus 67 Smith, Gerald 94 SOCC 121, 173 SOCC (system operations control centre) 118 Solloway, Dave 17, 167, 181, 184, 187, 193, 202, 203, 204 Song-Im, Manob 16, 202 Spears, Barry 161, 194 Spencer Dane 3, 237 Spigott, Peter 13 Spirit of Canadian 190 Sprugnoli, Roberto 236, 242, 278 St. Francis Xavier’s College (SFX) 22 Statton, Brent 72, 119, 176, 179 Steele, Harry 103 Stephen Wolf 118, 119 Stinson, Bill 139 Stoilen, Sheldon 100, 101, 103, 178, 189 Strauss, David 237 Sturgess, Roy (the General) 100, 179 Suddes, Hal 70 Surprise, Arizona 167 Sutch, Peter 171 Sutherland, Paul 73 Suva 194, 198 Swaak, Abel 177 Sydney, Australia 38, 114, 194, 197, 198
T Taipei 121, 129 Taormina, Italy 86 Tartini’s drum shop 29 Taylor, Claude 263
INDEX ~ 345
Taylor, Jim 76 Tel Aviv, Israel 93 Telling, John 28 Terrace, B.C. 48 Thai Airways 129 Thailand 16, 17, 167, 203 The Bangladesh Project 81 The Breakers 29 The Lima Project 80 The Platters 30 Thomas, Harold 34, 35, 39 Thorogood, Willy 169, 172, 183, 195 Tokyo, Japan 24, 27, 28, 57, 69, 71, 91, 121, 133, 140, 150, 156, 160, 162, 194 Toronto, Ontario 47, 63, 99, 151 Trans Canada Airlines (Air Canada) 49 Trans Pacific Tours Limited (TPT) 64, 111 Tsawwassen 103, 203, 220, 221 Turbulence 14 Turner, Ike and Tina 30
U United Airlines 119, 167, 168 University of British Columbia 39
V Valerga, Margarita 94 Vancouver, B.C. 24, 44, 50, 99, 156 Vancouver Airport (YVR) 30 Voth, Harry 73, 74, 75 Vrailas, Nick 93, 177
W Ward, Max 150 Wardair 12, 107, 128, 129, 149, 150, 151, 152, 213 Warden, George 100 Waters, Mike 170 Watson Lake 38, 65, 83 Waveney Inn 76
Weatherley, Bob 140, 141, 179, 227 Weatherley, Bob (Captain) 103, 110, 222 Wells, Rich and Green. 99 Western Canada Airways (WCA 32 Westjet 305 Wetston, Howard 265 White, Bob 258, 259, 285 Whitehorse, Yukon 38, 83 Wiedemann, Wolf 53, 71 Windsor Station 97, 100, 107, 123, 125 Wing Walkers 14 Wong, M.K. 92 Workers Compensation Board 42, 171, 268, 309 Wroxham, England 76
Y Yoshida, Hiroshi 91, 132
The demise of Canada’s other National air carrier, Canadian Airlines International in 1999 was heart wrenching to employees, unions, management and to the citizens of Canada. Confusion and stories abound as to what actually happened. This book sets the record straight as the man behind the employee rescue plan to save the airline decides to tell his story. Sid Fattedad immigrated to Vancouver from Hong Kong in 1968 to play drums in a rock and roll band, the Five Man Cargo. Having worked as an articling student in Hong Kong, the lustre of the music industry soon wore off and he found himself working as a junior accounting clerk for Canadian Pacific Airlines. It wasn’t long before Canadian Pacific became CP Air, the planes were painted orange and Sid became senior clerk of corporate accounting. The rising cost of oil in the 1970s, labor unrest and the acquisition of new planes made running an airline hard on the bottom line and the accounting department was always in the forefront. It was work all week, socialize at the pubs on the weekend with a tightly knit group called the ‘boat crew,’ who would often travel to England commandeering river boats on the canals of the Norfolk Broads, visiting pubs along the way. Sid became known as Kato. After receiving his CGA, Sid was promoted to Travelling Auditor where he learned first-hand CP Air’s overseas operations. The ‘night of the long knives, the Kremlin and ‘The General,’ all play into the story as the 1980s saw a sea of change at CP Air... Colussy fails to purchase Wardair and Sid is named to the board of Trans Pacific Tours Limited a little known but highly profitable subsidiary company. Don Carty purchases Nordair
and Sid becomes Comptroller of CP Air. A backwards take-over: Carty attempts to purchase PWA but is thwarted by the FASB and PWA purchases CP Air. Sid is appointed Vice-President of the Pacific Division, the most profitable division in the company. In 1988, PWA buys out Wardair. The new company made up of PWA, CP Air, Wardair and Nordair is called CAIL. Sid loved working in the field and got to know all the key players in the Pacific Division Tony Buckley, Tokyo, Harry Hargadon, Hong Kong, Keith Pope, Australia, Roy Fullerton, Hawaii, David Solloway, Thailand, Willy Thorogood, Shanghai, Warwick Beadle, New Zealand, Mike Waters, Fiji and Larry Nelson. Sid institutes the Quality program which leads to another promotion to Calgary as Senior Vice President in charge of customer service worldwide. In 1991 he returned to Vancouver as Vice President Western region and retired in 1992. Loved by all for his devotion to the company, he was given a huge send-off. A PWA merger with American Airlines, that same year, falls through and PWA stock drops, leaving the real possibility that a merger with Air Canada might be in the works thus creating a domestic monopoly; not good for management, unions, the consumer or the airlines employees. Sid maps out a plan to save the airlines and forms the Council of Canadian Airline Employees. The employees decide to try and purchase the airline themselves. They get all but one of the unions on board and present their offer. What takes place from here on in you will have to read about in Sid’s book but it is filled with treachery, deceit and government interference. Sid went on to a second career as CFO for the Workers Compensation Board of British Columbia for 14 years from 1993 to 2007. In 2012, Sid was diagnosed with Parkinson’s disease.
“CONCURRENCE HAS BEEN RECEIVED FROM ALL COUNTRY AND GENERAL MANAGERS AND THEIR OVERSEAS NATIONAL EMPLOYEES FOR KEITH POPE, GENERAL MANAGER, U.K. AND IRELAND, TO REPRESENT ALL OVERSEAS BASED EMPLOYEES ON THE COUNCIL OF CANADIAN AIRLINES EMPLOYEES” MAKE THIS BABY FLY SID! - Tony Buckley
WARFLEET PRESS * www.warfleetpress.com ISBN 978-0-9868793-3-3 $34.95
Printed in China