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Number 404   Date Sept 7th, 1999  BYN 1st Published in October 1995

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" ' "

. This is a special edition. We do not wish to have the NetLetter used as
a forum for the angst being expressed by our readers over the Onex and
AMR bid for the skies of Canada, but felt this article by Don Demeza
should be aired.
We urge those of you with concerns to contact the Canadian government.

We would also point you to a new web site that has been set up for the
expressed purpose of providing such a forum. Try it!


The following is Don's message -

To:  The Government of Canada

The great Liberals of the past, who recognized Canada's vulnerability
to U.S. aviation interests, must be turning in their graves as today's
cabinet ministers support the takeover of Canadian Aviation by American
Airlines.  Air Canada is a national icon, a world class airline, conceived,
built, owned and operated by Canadians. I find it hard to believe that my
government is actually throwing roadblocks in front of this Canadian
success, Air Canada, so that not only will the failed airline, Canadien
Airlines, be rewarded, but American Airlines will control aviation in
Canada forever.  American Airlines have positioned themselves to not only
control Canada's airlines but to improve their own financial position
through the progressive outsourcing of Canadian work and jobs to the U.S.
This is a direct repeat of the "generous?" help they provided to Canadien
Airlines in 1993.  How can we be so naïve?

American Airlines (AMR Corp) strategists are the best in the business.
They have planned their every move to control aviation in Canada and must
be rubbing their hands in glee as even the Canadian Government lends them
a helping hand.  Is it too much to ask for my government ministers to pose
the question, "What's in this for American?"  I don't think it is
necessary for me to even mention ONEX and Mr. Schwartz.  He is simply
their new front man as American keep a low profile and watch Canada
self-destruct with east/west controversies.  They listen with delight as
some of our superficial press simply pick Air Canada as the traditional
villain but understand little of either the past or the present.
American is putting up most of the money.  American is setting the terms
and completely controls the agenda.  Let no one think otherwise.
It's not difficult to predict the future.  Let's look at their record.

* As far back as 1973 Bob Crandall of American stated, "He who has the
biggest and best computer reservations system will succeed the most".
The American Sabre system and the Air Canada Reservec system were
developed in parallel.  Reservec, a recognized Canadian achievement, was
world class.  The vision was for a world-wide system, owned and operated
by Canadians, to sell Canada through the travel agents of the world.
It provided a hosted reservations service to almost every Canadian
airline (Pacific Western, Eastern Provincial, Nordair etc). Only Canadian
Pacific Airlines refused to have anything to do with the Canadian
objectives of their arch enemy, Air Canada.  By the early 80's there were
40,000 terminals from Europe to Japan.  They were located in Canadian
cities both large and small - even the far north was included. The system
provided reservations services to hotels, the Canadian military, VIA Rail,
and was even testing a system for Canadian parks. One of the objectives
was to stay sufficiently strong to prevent any of the five American
systems from taking over our Canadian travel business.  This Canadian
vision began to crumble about 1986 when Canadian Pacific Airlines
threatened to bring the American Airlines system, Sabre, into Canada.

* In order to keep the network as a Canadian business, Air Canada agreed
to a joint reservations computer company called, "Gemini".  During these
negotiations PW Corp (Pacific Western Airlines) purchased Canadian Pacific
Airlines and the negotiations continued.  Air Canada provided more than
80% of Gemini's up-front capital and market share, with the understanding
that PWA was committed to a long-term relationship.  The highly skilled
technical team, under a new joint management, set out to improve their
system to keep competitive with American's Sabre.

* American wasn't finished with Canada.  They very much wanted the
$2.50 or so, for every ticket sold on Sabre.  With such incremental
revenue they hardly needed to run an airline.  They know Canadians very
well and invariably come up with a, "Heads I win - tails you lose" type
of position.  Their attack this time took the form of a court order of
some kind which claimed that the Gemini system was not fairly displaying
the flights of American Airlines.  They lost this legal approach even
though they had the full support of Canada's own Competition Bureau.
However, they didn't really lose because they succeeded in keeping the
technical people of Gemini completely occupied for two years. Instead of
building their Canadian product to better compete with Sabre, their
attention was diverted to legal briefs and the training of lawyers in the
complex business of computer systems and displays.

* Around 1993 Canadien Airlines purchased Wardair and this was the move
which set the stage for their financial problems.  Everyone came to their
rescue - the Canadian Government, the governments of some western
provinces but most of all, their own employees.  American Airline
strategists were ready to help and Canadien Airline's executives welcomed
them with open arms.  If ever there was a "Trojan Horse" arrangement,
this has to be considered a masterpiece.
It was another, "Heads I win - tails you lose" deal.  It didn't really
matter to American whether Canadien Airlines became a howling success as
an airline or failed completely - their strategies were safe either way.
They made the same statements they are making today, "We have no intention
of running the airline" or something along those lines.

* American's first condition was that Canadien Airlines must withdraw
immediately from its partnership in the Gemini Reservations System.
Unfortunately Canadien's contract with Air Canada still had several years
remaining so how do you do this?  Well, you walk into a meeting of the
Gemini board and simply announce that as far as you are concerned Gemini
is bankrupt and on that basis you are withdrawing.  This was not true,
of course, but it suits the strategy.  The day before, you program the
system itself to, simultaneously with this action, send a network
message to all Canadian Travel Agents suggesting that the Sabre System is
ready to accept their business.  If this strategy had been fully
successful American Sabre would have realized something in the order
of $400 million per year.  Inasmuch as American was only investing
$246 million they could hardly lose.  It was only partially successful
but one of the conditions from American was that all Canadien oriented
travel agents would leave Gemini and go to Sabre.  This was sufficient
for American to realize their investment many times over.

* The second condition was that as long as Canadien Airlines was
losing money that their representatives on the Canadien Board would have
a veto to control all major decisions.  This obviously would include such
decisions as the outsourcing of work to American.  American tried to
maintain a low profile and insisted that they had no intention of running
the airline.  I now read in the Globe and Mail that a number of
Canadien's top managers are former American Airlines officials and its
Chief Financial Officer, Douglas Carty is the brother of American's
Chairman and Chief Executive Officer, Donald Carty. How gullible are we
as we listen to these same calming statements being made  by American and
Schwartz.  Of course they intended to run the airline then as they do
now and to provide the maximum benefit to American.

* A third condition was, that in order for Canadien to be more efficient,
a number of departmental responsibilities (jobs) would be outsourced to
American.  Presumably this means that Canadien was strapped with paying
for services to American with an ever decreasing Canadian dollar value.
I wonder if the employees of Canadien knew how little the help really was.
It was the employees who took the risks - not American.

* A fourth condition has only recently been discovered by the press.
It illustrates just how far sighted these American strategists are.
They were fully prepared for Canadien Airlines to approach bankruptcy
and knew the battle would be fought with the stockholders.  In order
to make it difficult, perhaps impossible for Air Canada or anyone else
to match the arrangements they would make, they protected their stock
holdings in a way, which under sale conditions, would multiply its value
several times over.  Of course this requirement has been waived for
their ONYX partner, Mr. Schwartz.

I have presented you with this background as briefly as I can.
If my Cabinet Ministers and Members of Parliament read this and then
continue to give Canadian Aviation to American Airlines and their friend
Schwartz then I am ashamed to call myself Canadian.  Have you forgotten
completely that you are supposed to work for Canadians and Canada?
Every week I read more of how the Corporate U.S. is swallowing the jobs
in Canada.  It's not good enough for our Members of Parliament to simply
respond by saying to each successive community, "We're seeking a good
compensation package".  We are talking about our country and of stability
for our families.  You got the aviation business into this mess by
blindly following the U.S. with deregulation.  You now have a
responsibility to come up with something creative instead of turning
it over to American Airlines.

The airline unions are threatening a strike.  This will never be
supported by the public and will only divert attention away from the real
problem.  But the union people are frustrated and cannot find anyone who
is speaking for Canada and Canadian jobs.

I now read that the Royal Bank, as a major creditor of Canadien Airlines
is using its investment funds to buy Air Canada stock.  Another supposedly
"Canadian" company which may even be operating in a conflict of interest
position in order protect their loans by helping American.
How short-sighted can we be.

I beg you (and I shouldn't have to beg a Member of Parliament) to not
treat the information I am providing as simply a statistical vote against
what you seem to be doing but to consider it in depth.  Your are all we
have and our country is at stake.  I do not want Canada to become another
of the poorer U.S. states.  Is it too much to expect for our members of
parliament to put Canada and Canadians first?

D.H. Demeza,  This email address is being protected from spambots. You need JavaScript enabled to view it.

" ' "

.  That's it for this time, please we need your input, send
comments and email addresses of any others who may be
interested to:

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