Employee ownership a solution for Air Canada’s morale woes (letter to the editor)

An open letter to Transport Minister, David Collenette.

Most people will agree that Canada needs a viable national airline. However, it will take more than money for Air Canada to pull through this crisis. The people running the airline day to day — the employees — have an equally crucial role to play in Air Canada’s recovery.

But the workforce is devastated, having discovered that neither legislation nor their unions could protect them from massive layoffs. Employees fortunate enough to have avoided the axe so far must wonder every day if their own jobs will disappear next. This is not a situation that builds morale or cheerful optimism.

These human aspects of the airline’s problems may appear minor against the magnitude of its financial needs, but ignoring employee morale will leave Air Canada in peril.

For frequent flyers, the performance and attitudes of airline employees will help determine if we, the airline’s formerly loyal customers, will feel comfortable with Air Canada again.

One question is how to rebuild employee commitment and dedication. A related issue is one of fairness: if employees share the pain, shouldn’t they also share any potential gain?

Consider this: if employees were given an ownership stake in the airline, they would be far more motivated to provide exceptional service, knowing that they have the most to gain by helping customers regain their confidence in the airline.

For proof of the power of employee ownership, look at the outstanding financial results and customer service at our own Westjet, and at Southwest Airlines in the U.S. Both are shining stars in their industry, and both also have broad-based employee ownership and emphasize employee participation in operations. Is this a coincidence? Absolutely not.

Americans have been using employee ownership for decades, sometimes under similar circumstances. Most notably, when the U.S. Congress helped Chrysler avoid bankruptcy in 1979, it insisted that in return, the company contribute US$160 million in stock to employees over four years — approximately a 15 per cent ownership stake in Chrysler.

I suggest a similar arrangement would be a reasonable “quid pro quo” requirement for helping Air Canada, if the government decides to do so. I recommend that:
a) the government’s financial contribution be structured as an equity investment in new common voting shares issued by the company, and that a substantial portion of the stock is allocated to employees; or
b) as a condition of receiving any form of financial assistance, Air Canada is required to contribute an equivalent amount of stock to the employees.

Some unions, such as the Steelworkers, understand and adopt employee ownership when circumstances warrant. Some unions, including the Canadian Auto Workers, oppose any form of ownership for employees on political/philosophical grounds.

In many cases, a union’s anti-ownership attitude is based on historical experiences in which they were forced to accept almost valueless shares in exchange for contract concessions. It is a sad comment that most unions have not experienced many well-intentioned and well-designed employee ownership plans.

Certainly caution is warranted, since minor variations in the details of an employee ownership plan can change it from a benefit to a trap, as we saw at the former Canadian Airlines.

But overwhelmingly, the benefits of involving employees as real equity partners have been confirmed by research in many different countries. These include greater productivity, better customer service, lower staff turnover, faster revenue growth and larger profit margins.

With employee ownership, Air Canada management would be accountable to a large new group of shareholders — employees who understand the business intimately and have a strong personal desire to see it succeed.

If Air Canada is to receive more than the short-term financial assistance announced Oct. 2, the company should be required to make a substantial contribution to an employee ownership plan in return. This response will demonstrate to Canadians that our federal government is serious about ensuring any taxpayer-funded assistance creates real value for the greatest number of Canadians and top quality customer service for the travelling public.

Julia Markus
Executive Director
Employee Ownership & Incentives Association
(The Employee Ownership & Incentives Association is a nationwide non-profit organization.)

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