If someone drives off the road, the investigating officer will test the condition of the vehicle, investigate the weather conditions, and check whether the driver was impaired. But if others drive off the road in the same place, highway officials will quickly conclude that something’s wrong with the road.

Unfortunately, Canada’s airline policy-makers haven’t managed to reach the same no-brainer conclusion. Jetsgo is just the latest Canadian airline to fly off the road (forgive the mixed metaphor) — one of dozens since the industry was entrusted to “free competition” in 1987. Yet government still refuses to consider that there just might be something wrong with a system that perpetually reproduces financial crisis, dislocation and potential safety hazards. Worse yet, by flirting with further liberalization (including allowing foreign competition on domestic flights), Ottawa would make our skies more treacherous — not less.

The economic costs of Jetsgo’s failure are as painful as they are predictable: thousands of stranded passengers, who spent millions on worthless tickets; hundreds of laid-off workers; mountains of red ink for unfortunate investors. More chilling in Jetsgo’s case, however, was the growing evidence that financial stress was correlated with worrisome operational and safety issues: a botched landing in Calgary, debris on the runway at Pearson, inadequate procedures and documentation.

Transport Canada regulators pretend they can guarantee safety standards even when airlines are scrabbling for their financial survival. After all, they prohibited Jetsgo planes from flying any higher than 29,000 feet after discovering safety irregularities. (In an emergency, perhaps passengers would then be comforted knowing that at least they weren’t falling from the usual 35,000 feet). I fear the regulators are wrong: financial stability is a precondition for operational excellence, and hence for safety.

When Jetsgo launched in 2002, I predicted on CBC Radio that it might last a year before foundering on the same rocks of reckless expansion and undercapitalization. I was wrong: it survived two-and-a-half. Roots Air’s 2001 record for airline futility (just six weeks in business) still stands. Nevertheless, Jetsgo is now laid to rest in an increasingly crowded cemetery, beside others whose always-optimistic business plans proved as solid as cumulus: Canadian Airlines, Wardair, Greyhound Air, Royal Air, Canada 3000, Vistajet, Intair, Quebec Air, City Express, and on it goes.

Air travel is a complex and expensive undertaking. But perversely, it’s easier than ever to launch a new airline into Canada’s happy-go-lucky skies. You don’t have to buy aircraft anymore: you can lease them. You don’t need ticket offices: use the internet. You can even contract out the flight operations. All you have to do is invent a catchy logo and hope you sell enough tickets to pay for the gas in the plane by the time it takes off.

The combination of easy entry for new start-ups, plus potentially lucrative profits for those lucky few who successfully build a critical mass of destinations and passengers, has made the airline industry an economic wrecking ground. Canadian airlines have now lost far more money than they’ve made since the first powered flight in Baddeck, N.S., in 1909. Jobs have been destroyed, work has been degraded, quality has deteriorated. It’s even hard to argue that consumers have benefited: yes, some fares are incredibly low, but overall the cost of flying (including all the new taxes and user fees) has grown since 1992.

Even much-copied WestJet has reached the limit of its success; it, too, is now piling up losses in the face of the overexpansion and ruthless fare-cutting which it itself spawned. Jetsgo’s demise will fatten WestJet’s bottom line for a while — but it is obvious that other fools will soon rush in where others tried (and failed) before them, and the entire utterly useless cycle will start again.

Legendary investor Warren Buffet once claimed that “Karl Marx himself couldn’t have done more damage” to capitalism than the inventors of commercial flight. Clearly, air transportation is one of those industries where capitalists need to be saved from themselves. Yet Transport Minister Jean Lapierre has launched a process to see if still more deregulation and competition (including “cabotage” rights for foreign carriers in Canadian airspace) would somehow succeed, where 18 years of deregulation and privatization have so dramatically failed.

Instead, our air policy should bank sharply and head in the opposite direction. Very clearly, there is too much competition among domestic airlines — not too little. Government should impose aggregate capacity limits in the domestic market (as occurs internationally) to short-circuit the private sector’s self-destructive tendencies. It should design financial adequacy tests for airlines — like they do with banks, another industry where the economic and social consequences of private failure are too high. It should ensure that Canadian airlines maintain a fair share of international business, and a fair share of the associated jobs, instead of dreaming we could somehow come out a winner in a global airline free-for-all.

Jim Stanford

Jim Stanford is economist and director of the Centre for Future Work, a progressive labour economics institute based in Vancouver. He has a PhD in economics from the New School for Social Research in New...