You call Hong Kong for a dime because of too much capacity on satellites over the Pacific and government policy in NAmerica that moved cheap telephone service from the local level to the long distance one, and the recognition that market growth was not at the local service level but in "long haul" calling. Satellites -- and cell once the transmission/reception networks are in place -- provide a distance insensitive mechanism of moving voice and data. Since more than half of Canadians come from somewhere else, and live away from their places of birth, once technology provided the tools, the policy would change. The highest cost component, and heaviest capital investment, is on the ground, at the local telco/cellco level, not in transmitting the message 18,000 miles back and forth in space.

If you want to talk orthodoxy, then remember the sun used to revolve around the earth according to the Catholic Church. As long as the orthodoxy is the marketplace, then that marketplace has certain parameters, one of which is gross size. Canada does not have gross size. AC -- and CP -- always made their money from internaitonal long haul traffic. Just like the phone companies made it off long distance. Only airlines never had the monopoly like phone companies had.

The long haul traffic paid off the loses on the local and short haul traffic, and the huge investment in personnel and infrastructure required at each airport. Cross subsidization. However, with the steep reduction in international airline pricing, that profit centre came under the same pressure the competitive and cost-conscious domestic market was always under. On each route there was competition, mainly now for price rather than service/schedule.

It was the collapse in profit margin across the whole system which has placed the airlnes in the situation they face. Every time two compete, they drive prices down well below the level of viability because they want cash flow and market share. In a country with 30 million potential customers, the absolute market is too small. That's why Milton followed too strategies: dominate the transborder market, and build more international routes. The operating economics on the domestic side were already a disaster and could not operate in a successful [financial] fashion as long as there was more than one carrier. These other markets guaranteed revenue growth and passenger diversification, adding foreign travellers to that fixed number of Canadians.

Remember, the US only has 5 major national carriers: AA, UA, NW, DL and CO, with couple of regionals: US, SouthWest, AmericaWest and AS|Horizon. And a domestic population base of 320 million. You do the numbers, but it says to me Canada can support about 1 national carrier, and just barely do that. Yet we have always had 2 losing money, and a raft of charters doing domestic service, something the US has never had.

If AC becomes the only game in town, they still cannot afford to raise fares to rediculous levels because people will just not fly, or charters will return to scoop up the low end of the market again. But AC still has planes to fill, staff to keep occupied, and shareholders [and new investors] to return a profit to. it will still face still competition on transborder and international routes. Maybe we will even move to a more sensible pricing structure that can yield a profit on every flight, rather than the current one which few can understand, and still doesn't make the airline money.

Enjoy calling Hong Kong from your canoe, my friend. But until you can be moved about the world in a Transporter Beam, the laws of business and markets will still dictate certain imutable realities of the airline world. Look around you. There will not be 18 European airlines in a year's time. There are not 2 national carriers in little Australia any longer. Even below the border, we may see some rationality return and find we are down to 3 or 4 major carriers, along with SouthWest and AS. And it was not just September 11th that did all this. At least Milton knew what the future looked like and started his reductions before then. Most carriers refused to acknowledge the recession and their need to end the vast overcapacity and airline-killing fare competition to fill all these seats.