The Flak Flies In Canada's Air Wars

THIS air war is being fought on the ground. It is the battle for dominance in Canadian skies between Air Canada and Canadian Airlines, and it is not just the airline executives - firing press releases and advertorials - who are doing battle.

"This is getting really bitter, we're getting a hard time from the competition," says a Vancouver-based flight attendant from Air Canada. "I was walking through the terminal and asked a Canadian [Airlines] pilot if he'd had a nice flight. 'Why should I tell you,' he said."

That competitive bitterness between employees of the two airlines has only surfaced in the past year as the battle has intensified. The latest development could increase the rancor.

Air Canada has made a billion-dollar bid for the international routes of Canadian Airlines and eight large jets operated by its only major competitor.

The answer from PWA Corp., Canadian's parent company, was a quick refusal. But the Calgary-based airline says the bid alone could put Canadian Airlines out of business and leave Montreal-based Air Canada the monopoly carrier in Canada.

"It's not even an offer," says Rhys Eyton, chairman of PWA. "It's a malicious public relations strategy."

Canadian Airlines is renegotiating its debt and says the Air Canada offer could make its creditors nervous and force the company to do some kind of deal with Air Canada. But Mr. Eyton says he has headed off that crisis for now.

"We were on to a lot of creditors and shareholders that this [offer] was aimed at, and up to this point we've had solid support," Eyton says.

ALTHOUGH Canada's once heavily regulated airline industry is now seen by the government as a private affair, both airlines have asked Ottawa to step in, at least as referee.

"The government can't allow this to go on," Eyton says. Prime Minister Kim Campbell needs to end the airline war before it becomes an election issue this fall, he says. "It's going to be a terrible, terrible debate in the election. This will be at every campaign rally across the country. Our employees, their employees will be out there in numbers."

One reason for the debate is the perception that Canadian is a Western-based airline - head office in Calgary, Alberta, main base in Vancouver - while Air Canada is a Quebec-based company, with just about all its operations in Montreal.

If you want to ask Air Canada a question, you have to call Montreal; they fired their public relations man in Toronto.

Prime Minister Campbell, whose home base is Vancouver, does not appear worried that the airline squabble will erupt into a full-scale east-west feud. She said in Montreal she would not step in: "I believe this is a question that the companies should be resolving themselves."

How did the air war start?

Air Canada and Canadian Airlines are partners in a computer reservation system called Gemini. It competes with Sabre, another reservation system operated by American Airlines.

Canadian and American have been trying to join forces for several years. Air Canada has petitioned the government to stop it. The federal government says it is a private matter.

However, two rulings by federal courts have not allowed Canadian to get out of its Gemini Reservation arrangement with Air Canada. There is now a deadline; if Canadian cannot get out of the Gemini system by the end of this year, American Airlines will end its plan for joint operations with Canadian Airlines.

The federal competition tribunal will set a date for the Gemini case on Sept. 8.

Air Canada made an earlier bid to merge with Canadian but that deal fell apart when Canadian said it was more a takeover than a merger, designed to ensure American Airlines stayed out of the Canada market.

Down in the trenches they are worried.

One Vancouver-based flight attendant for Canadian Airlines thinks her company is doomed. "By the spring I'm either going to be working for Air Canada or I'll be out of a job."