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The fun & fascinating stories of Supply Chain & Logistics.
Bryndis Whitson: [00:00:03] Hi, my name is Bryndis Whitson, and you're listening to the Zebras Apples podcast. The fun and fascinating stories of supply chain logistics. Planes and airlines take us around the world. They take us on vacation. They take us to meetings and to see family and friends. They also deliver cargo and our beloved pets. In this podcast episode, my friend and former boss at the Van Horne Institute, Peter Wallis, shares stories about his time with the Government of Canada and Canadian Airlines. And if you've ever had a passion for the aviation industry, or you just really like a good story with a surprising twist or two, then this episode is for you. Please join me in hearing Peter Wallis talk about the airline sector.
Bryndis Whitson: [00:00:48] Okay, so I'm here with Peter Wallis, who has had a very distinguished career in a lot of areas in transportation and supply chain. Let's start off with telling us a little bit about your career history.
Peter Wallis: [00:01:04] Sure. Well, thanks for having me, Bryndis. I'm delighted to be part of this chain of podcasts that you've been putting together. I spent a number of years in the aviation industry, directly and indirectly, and I started off my career in Ottawa as a legal counsel for the Canadian Transport Commission. It's now known as the Canadian Transportation Agency, but it was founded in the last century to be the overall regulator of transportation in Canada. Prior to that, there were a number of regulatory boards. The Railway Transport Board, for example, regulated railways. Also, regulated telecommunications, which may sound a little anomalous, but the fact is that the telephone lines were hooked up to the poles that ran alongside the railways. So that's why they had jurisdiction over not only railways, but also telecommunications. Now we have the CRTC, which has more than a bag of issues related to, other than wired communications, but that's another story. The other boards were the Air Transport Board, and there were a couple of others, and they all came together in the Canadian Transport Commission. I had the opportunity to join that organization as a legal counsel after I returned from the UK, where I had taken a master of laws degree, primarily focusing on aviation at the London School of Economics.
Peter Wallis: [00:02:34] Interestingly enough, I joined the same day that the appointment to Edward "Eddie" Laborde, a very prominent oil man in the Calgary community. He's now passed away, but Eddie was appointed by Jack Pickersgill as a member of the Canadian Transportation Agency. Jack Pickersgill subsequently became the president of the agency. One of my first tasks with the agency, because it was responsible for determining the success or failure of any application to provide an air service in Canada. From the large operators for the large airplanes down to the bush planes, they all had to be licensed by the Air Transport Committee of the Canadian Transportation Commission, the CTC. As legal counsel, I would go out on these hearings and assist the commissioners in the development of the evidence, which was primarily the responsibility, of course, of the applicant, or indeed the opponent, because these were full blown hearings in which an entrepreneur could apply to operate an air service in a certain area. But there would be the incumbents who would clearly argue that there was enough capacity provided by them and that no competition was required, and the agency had to make a decision on whether there could be more competitors based on the simple premise of public convenience and necessity.
Peter Wallis: [00:04:14] If you can have a definition of public convenience and necessity, you'll probably find many of them if you go into the textbooks and the dictionaries. But some people described it as an exercise in determining how many angels can dance on the head of a pin. One of my first hearings was actually with Mr. Pickersgill, and it was a hearing in Newfoundland. In fact, it was in Happy Valley-Goose Bay. As legal counsel, part of my role was to swear in witnesses because they were appearing before a quasi judicial tribunal. You were obviously under oath with the penalties of the Evidence Act to follow if you were found to have committed perjury. One of the witnesses that came forward in this hearing, I can't remember the exact details of the matters that were before us, but the subsequent witness to the applicant was a local member of Parliament. Jack Pickersgill, who some of your listeners may or may not know so let me just give a quick, brief thumbnail there. Jack Pickersgill had a very illustrious career as a Liberal in the government of Mackenzie King and subsequently Louis St. Laurent. He was initially a bureaucrat and rose to the position of the senior bureaucrat in the Privy Council, the clerk of the Privy Council. Then he was persuaded to go into politics by, I believe it was Mr. St. Laurent, and go into politics he did. The writing that was chosen for him was one that he was obviously not a citizen of at the time. Quickly though, picked up the language, cadence, the community spirit, and indeed the characteristics of a Newfoundlander because his writing that he was parachuted into was a Newfoundland writing. Bonavista-Twillingate.
Peter Wallis: [00:06:27] Mr. Pickersgill therefore, and he actually had been a cabinet minister and he'd been Minister of Transport. The old story was, when he put together the Canadian Transportation Commission, he tried to determine who should be leading that commission as the president. One day he apparently looked in the mirror and said, well, who better than I? He became the president. He was a full time commissioner, went out on this hearing with his young counsel, Peter Wallis. The next witness coming up to be heard is the honorable member from the same writing, because the writing in which Happy Valley is located, it's not in Mr. Pickersgill's old writing. As I'm taking out the Bible to swear in this eminent Member of Parliament, Mr. Pickersgill leans over to me and in full voice says, Mr. Wallis, it's not necessary to swear in a member of Parliament, they always tell the truth. That was the beginning of my career, which had a number of interesting ups and downs with the agency, more ups than downs because I'm able to be telling you these stories today. Let me go to the next one, which was really quite interesting. I have mentioned that Eddie Laborde was a member of the agency, the commission, and he was well placed, because he was from Western Canada, to understand everything that was going on in Western Canada.
Peter Wallis: [00:8:08] So much to his amazement, and indeed everyone's amazement at the Commission, we read one day that the government of Alberta had moved in to purchase, on the open market, all of the shares of a publicly traded company called Pacific Western Airlines. Now a bit of background, in Canada there were two major carriers. One, Air Canada, the national carrier, which Louis St. Laurent made sure carried the flag around the world, and it was the chosen instrument of the Government of Canada to provide air services both domestically and internationally. There was another carrier by the name of Canadian Pacific Airlines based in Vancouver, which was owned by the private sector. It was actually owned by the Canadian Pacific Railway. It had great aspirations, but virtually very little elbow room to compete in Canada. In fact, Canadian Pacific only earned the right to offer services between Vancouver and Montreal sometime in the late 60s, when an eminent economist from England, Stephen Wheatcroft, was engaged by the government to do a study to see if Air Canada, the service provided by Air Canada across the nation, could withstand the competition of another carrier. As a result of the Wheatcroft study, the Canadian Pacific was allowed two frequencies a day across the country.
Peter Wallis: [00:09:48] In any event, in addition to the two major carriers, there were a number of regional carriers that were started up by entrepreneurs to provide commercial services into smaller communities across Canada. These regional carriers were more or less developed from the bush pilots that really built this country in the north. The carriers across the country were Pacific Western based in Vancouver, and then there was Transair based in Winnipeg, Nordair based in in Montreal, and Eastern Provincial Airways based in Halifax. They all had specific areas, territories, that were designated under a regional air carrier policy by the government. Between those territories, they could not travel. It was a very difficult thing for them to expand outside their territory. It did happen, and one had to, in fact, go through an application process just like the one I described when I was a counsel with Mr. Pickersgill, to indeed prove to the regulator that the service between the regions was required by the public convenience and necessity. Pacific Western Airlines had a number of routes, both in British Columbia into the north and into Alberta. So we were all amazed to read one day that the government of Alberta had moved into the public market and taken up the shares to give it a controlling share in Pacific Western Airlines.
Bryndis Whitson: [00:11:35] Surprise!
Peter Wallis: [00:11:36] One of the other things that had to be, anyone who wanted to acquire an interest in an air carrier which, PWA in question here, anyone who wanted to acquire an interest had to, again, prove to the regulator that they should be allowed to acquire such an interest. Sometimes these applications were denied, but in this case we didn't even have an application. So what happened here? In fact, there were a group of well-meaning folk in Winnipeg who had started the process of applying to the agency to take over an interest in a regional air carrier. But the government of Alberta felt it did not have to do that. I recall sitting with the then-president, because Mr. Pickersgill had had moved along. Edgar Benson, the former Minister of Finance, he was then president of the Canadian Transport Commission. Sitting down with him and Don Getty, representing the Municipal affairs, International affairs, international relations minister for the Government of Alberta, and Jack Major, a council from Calgary, sitting down in the office of Mr. Benson, to hear their explanation as to why they thought that they were eligible to take over an airline in Canada without adhering to the laws of Canada. Good question.
Bryndis Whitson: [00:13:12] Very good question.
Peter Wallis: [00:13:13] So a series of court cases began. Federal court and then ultimately up to the Supreme Court of Canada, where the argument that carried the day was that, under the Aeronautics Act, in order to acquire an interest in an airline, a person had to make application to the agency. The government of Alberta, through Jack Major argued that under the law, the definition of person was, under the Interpretation Act as it applied to the Aeronautics Act, did not include a province. So a province, for that purpose, was not a person. Not dissimilar to the case that everybody thinks about is the persons case with the women here in Alberta. In any event, the Supreme Court decided, in fact, that that argument was correct. The government of Alberta was not a person and therefore was entitled to do what they did. One can imagine that there was an immediate modification, an act through Parliament to include provinces as persons under that act.
Bryndis Whitson: [00:14:22] Very much so.
Peter Wallis: [00:14:23] That was rather interesting. Why did the Government of Alberta acquire the airline? Well, they were concerned that the airline would have been acquired by interests in Winnipeg. This airline, in the views of Peter Lougheed, and I think rightly so, was the gateway. The way of facilitating Alberta's northern gateways. You need air services to develop economies, and that was his vision. It turns out he was clearly on the right track there. So that was one of the first things I was doing as a counsel at the Canadian Transport Commission. Then, and I'm sure there are other stories, but I won't bore you with them. Then I decided it was time to leave the agency. By that time, I'd been on leave from the agency to work as the executive assistant to two ministers of Transport. The first being Otto Lang, who was liberal, and he brought me on to advise him on transportation policy. When his career ended, when he was defeated, he sat down with his successor, the honorable Don Mazankowski. The conversation was frankly rewarding, where Otto said to 'Maz', 'this guy, you might want to think about taking him on board as your chief of staff because he didn't screw up too badly with me'. That was my final stop in the government of Canada. It seemed to me to go back to the agency would be a challenge, which I was prepared to undertake. But I wanted to look further afield. A couple of discussions to two airlines, one Air Canada and the other a small airline in western Canada called Pacific Western. I decided that the family and I should move out to Alberta, which was a completely unknown quantity to me. I had driven through it once on a cross-Canada trip. But Calgary, it was with a small company called Pacific Western Airlines, which by now had relocated from Vancouver to Calgary because of the new ownership.
Bryndis Whitson: [00:16:45] What a great way, because your experience, you learned a little bit about Alberta through those few different encounters, so what a great opportunity.
Peter Wallis: [00:16:55] It was a great experience. It's difficult, I'm sure people have gone through this, to move completely across the country into what was, frankly, something unknown to me. But we got to find that Calgary was a place of opportunity, that if you volunteered for something, they said, yeah, and you did it. You grew both personally, from a reputation perspective, people got to know you. It was the right move to make. I was delighted to be able to settle here and then settle in with Pacific Western Airlines into their team. My title in those days was staff vice president regulation. That included, because of my legal background, getting the master in laws in aviation law, working with the general counsel, Murray Siegler, on a number of related issues. Both on the regulatory side, which was my old Canadian Transportation Commission work. I ultimately, then, appeared back before the agency that I'd been legal counsel for, but it also gave me the chance to do some legal work. One example was the sale of a Hercules airplane. Now, a Hercules airplane I'm sure most people have seen. They're basically one of the workhorses of development of northern Canada. They can carry a huge amount of freight in the belly, they have a drop down tail, you'll see them primarily in military use, but they had great civilian use. You could carry almost anything on a Hercules. They had great value both militarily and civilly. Pacific Western operated a number of Hercules airplanes. I've got a couple of Hercules stories.
Bryndis Whitson: [00:18:50] That sounds great, I love it.
Peter Wallis: [00:18:52] There was a Hercules airplane that we found was surplus to need. Murray came to me one day and said, we've got this potential deal with a guy out of southern France, a small company operated by a jeweler, who wants to buy this Hercules. It's a pretty straightforward deal, would you please do the paperwork for it? I said, happy to do it. So we learned a little bit more about the individual, his first name was Ali. Literally yes, he ran a jewelry shop in southern France. The paperwork having been put together, Murray and I were talking about it one day, almost the day of closing, and we both, I don't know how we came to the conclusion, but we thought, maybe we need to make another phone call, which we did. We made a phone call to our director of security, John Skelton ex-RCMP, who was very well connected. John said, so you are selling to this individual, I'll make a call.
Bryndis Whitson: [00:20:01] That sounds like a good idea.
Peter Wallis: [00:20:03] So he made a call, he came back within an hour, and he said, you know what? That name you gave me set off a lot of bells and lit up a lot of lights. It actually lit up lights as far as Langley, Virginia. Which is, of course, as you probably are aware, where the CIA is. As the story unfolded, it appeared that Mr. Ali was not just simply a jeweler, he was an arms dealer.
Bryndis Whitson: [00:20:38] That would explain why he needed a 'Herc'.
Peter Wallis: [00:20:39] He was obviously interested in using it for something. Not to say that Hercules' have not been used for moving arms. That's another story I'll tell you in a minute. Now, the senior vice president who had been arranging this deal was not too pleased. Because we brought this bad news to him, I was nominated to go and tell this individual who was waiting to sign the papers out in the anteroom, from the board room where the closing was set to happen, that we really weren't going to sell him this airplane because he was a known terrorist. I was nominated to make that, with the glory goes the tough stuff. He didn't take it particularly well.
Bryndis Whitson: [00:21:29] I would imagine not.
Peter Wallis: [00:21:31] He said, by the hair on my mother's head, I'm not. I want to invite you and your wife to come and visit me in southern France and see my jewelry store. Didn't happen. So he walked away and that was my first and only 'Herc' sale, which didn't happen. However, the story goes on. A month later, the senior VP announces that we have another purchaser. Oh, good. Well, the paperwork's ink's dry on it, but we can just change the name, which we did. We sold this Hercules to a relatively well known Belgian carrier, primarily a freight carrier. What we normally do with any type of sale of airplanes was to send along a mechanic to make sure that when we delivered it, it was a mechanically good shape, and if anybody found a problem, he could repair it. His name is Harry Powell. Harry reported back to us, it was actually on Christmas Day, whatever the year was, that he said, we delivered the airplane, but this morning it's just taken off and it's gone south. Well, that was our reaction, "oh". Does the story end there? Well, no it doesn't.
Peter Wallis: [00:22:58] About another couple of months, got a call from one of our colleagues in Winnipeg who said, you got to watch 60 Minutes. Now, it obviously is shown at different hours across the country, so with that notification we were able to turn it on. Here was a story about Alaskan Airlines who had sold an airplane, a Hercules airplane, which had ended up in the hands of someone who shouldn't have owned it. 60 Minutes, I recall, had given us a call within the month to say, we understand that you had a Hercules airplane, and we just decided not to comment. Because what's the point? We didn't know what they were aiming at, we had no idea. However, what they had in mind was clearly now disclosed on the big screen. Because here's my "friend", Mr. Ali, who by the hair on his mother's head said he wasn't a terrorist, had nothing to do with terrorists, and please come and visit him at his shop, here he is with his arm around Colonel Gaddafi. So our airplane, when it went south, we suspect ended up in the Air Force for Colonel Gaddafi and that's the end of that particular interesting, somewhat amusing, tale.
Bryndis Whitson: [00:24:29] But you didn't officially sell it to him.
Peter Wallis: [00:24:32] No, the airplane was, what would be the right word, laundered through this company in Belgium. I don't want to cast aspersions on them, they may not have known who they sold it to.
Bryndis Whitson: [00:24:47] You never know. Luckily, the seller was not you.
Peter Wallis: [00:24:52] Right. There are clearly laws in Canada, now, against that type of activity. The next Herc' story, and this is a very tragic one. The Hercules fleet that Pacific Western had didn't just operate domestically or in North America. They were almost like tramp steamers. They were sent out around the world to pick up loads at point X and deliver them to point Y, with the hopes there'd be a load at point Y to carry it off to point Z. Just like a trucking operation. That's what they were, they were basically a huge truck that just happened to fly long distances. Quite often they would fly loads between countries in Africa, I'm sure they had some idea what they were carrying, sometimes they didn't. This story has nothing to do with what they may or may not have been carrying between those countries, which quite often were at war with each other. But this story has to deal with a human, it's a tragic story. The flight was bound for an evening arrival in an African nation, basically in the middle of the Congo. The arrival time was after the sun had gone down, and the navigational aids in those days were operated by the airports. The lights, the beacons, etc. To the dismay of the crew flying over this dark jungle, all of the navigation aids have been turned off when the folks went home.
Peter Wallis: [00:26:42] So they flew, trying to find it, and they flew and ultimately the airplane crashed in the jungle because it, frankly, couldn't find a safe haven. There were casualties, and then there were those who were treated in the hospitals and returned to Canada. One of my tasks as a lawyer was to deal with the insurance group in the company. They came to me one day with a case which was really quite sad, but quite telling. We had an employee who came back from that flight who had crashed and been treated in an African hospital for over a period of a couple of weeks to get the person back in shape to come to Canada again. He started to show some very severe signs of weakness. Then it would go away and then it came back. Ultimately, he died. He was one of the first cases of T sickle cell anemia, otherwise known as Aids in North America. There was obviously insurance claims on that from his estate, but that was the result of that unfortunate incident in the darkest jungles of Africa.
Bryndis Whitson: [00:28:03] Oh my goodness, wow. It's interesting how that impact can occur and snowball in different ways that you're not expecting.
Peter Wallis: [00:28:12] Everything has a consequence, and not necessarily a foreseen consequence. The airline stopped, I think, not because of this incident, but found that they had more places in Canada to deploy the Hercules, and they became less itinerant and more focused in their role in the airline. Ultimately, they were all sold. The final one, I think, went to Northwest Territorial, and that aircraft in turn was sold to First Air, and I think First Air is still operating.
Bryndis Whitson: [00:28:47] Oh, wow. It's still going.
Peter Wallis: [00:28:48] Still going as far as I know, but I could certainly be wrong on that. So those are a couple of stories about the legal work that I undertook when I was with the airline. Then I suppose the next story is more focused on the government relations, because I was responsible for government relations with the airline. Government relations in Canada between airlines was fraught with peril. You never knew whether your friends were friends or they weren't. But because Pacific Western grew by acquisition, it acquired Trans Air from the shareholders in Winnipeg, and it expanded. It then had a larger region, it had the region that Transair had and the Pacific Western had, and then the thought was, we just have to get into Toronto. How do we do that? We apply to provide an air service between a point in Manitoba and Toronto linking Toronto with Calgary, or Saskatchewan then Calgary. What point in Manitoba? Winnipeg would be difficult, because there's already a huge amount of service by Air Canada between Winnipeg and Toronto. You couldn't because public convenience and necessity, hard argument to make. There should be more frequencies than that marketplace. By the way, just to track forward to where we are today, if Bryndis and I wanted to start an airline and fly between any points in Canada, we would have to prove that we had insurance, we had financial wherewithal, we would have to have airplanes, we would have to have a business plan and we'd have to have a safety management plan, and we'd also have to have rocks in our heads. The regulatory process has been deregulated, and public convenience and necessity is now just something people remember was applicable many years ago. However, in order to be able to operate between a point in Manitoba and Toronto, we had to pick a point and we had to prove that the air service to that point was of a nature, that it met the test of public convenience and necessity. So we chose Brandon, Manitoba.
Peter Wallis: [00:31:31] Brandon was the logical point because there was no air service, or just very limited air service, and it was a thriving community, it was a growing community. There was a community of interest between Brandon and the West, out to Calgary. Clearly a community of interest between the Brandon catchment area and Toronto. We put together an application which was hotly opposed by Air Canada and originally hotly opposed by Canadian Pacific Airlines. My job was to go out, and the case was pretty simple. We put our numbers together to show that it was needed, that it wouldn't in any way infringe. Well, not really. It would obviously infringe on Air Canada's services out of Winnipeg, because people from Brandon who want to travel to Toronto would have to get on the highway between Brandon and Winnipeg, particularly in winter conditions with the snow and the ice, so that they could get their plane in Winnipeg. But that's the way that they would be able to make the connection from Brandon to Toronto. We were proposing an alternative. Part of my role was to talk to the community, which I did. I had many opportunities to go out and talk to community leaders, to effectively work with them, to get a groundswell of interest from the community to come and appear as witnesses before the regulatory agency when they were holding the hearing in the courthouse in Brandon as to whether this service was necessary.
Peter Wallis: [00:33:09] It was pretty good show. The community stepped up. The courthouse just happened to be in a square, and all of the community of Brandon, on the morning of the hearing, decided it was time to have a motorcade around that square with horns honking and signs saying 'give us Air Service', et cetera. They momentarily blocked the commissioners who were trying to get to the courthouse for the hearing, and they couldn't get across the road with all this traffic going around in a circle with horns beeping away. But that was only the beginning. We decided that public convenience and necessity meant 'hear from the public'. So we empaneled, we got about 100 witnesses who would clearly be interested in telling their tale to the commissioners about terrible road driving in the winter, and why couldn't we have a more convenient service and how often they go to Toronto, et cetera. There were so many witnesses that the chairman decided he would empanel them five at a time, so they could say their piece and go on the public record. The opposition was interesting.
Peter Wallis: [00:34:28] Canadian Pacific's counsel, John Hamilton, was a very savvy lawyer. He took one look at what we had put together in support of this application, and made an opening statement that said, we see the overwhelming support for this application, we wish the community well, and withdrew their objection. Air Canada, on the other hand, did not. The counsel, still a very good friend of mine, was told by his-I'm now telling the tale that he told me-he says he was told by his management that he should go out and oppose this as strictly, as strongly as he could, oppose the application. He was able to muster such arguments as, if this air service is allowed to occur, commissioners, we at Air Canada are going to have to reduce our level of service to Winnipeg. You can imagine when you're talking about icy roads, that didn't cut any ice with the commissioners. They approved that application pretty quickly. That little tale, I guess, is only relevant to those who've ever had experience in appearing before regulatory tribunals, having to make a case which in this instance turned out to be with a lot of legwork and a lot of prep, a pretty successful one.
Bryndis Whitson: [00:36:04] It also is that impact that these kind of opening markets into more remote or rural areas, or at the time developing, but how much that can change an economy, too.
Peter Wallis: [00:36:22] Well, certainly. That was the intention and that was the argument that the community developed along with ourselves. But let's not forget, we got access to Toronto.
Bryndis Whitson: [00:36:35] Exactly. Good opening of doors that way.
Peter Wallis: [00:36:39] Working for an airline, while those are great successes, you also run into a lot of rather interesting areas of stress, concern and sometimes what you might consider quasi warfare. The aspirations of the leadership at Pacific Western Airlines was to become a carrier with a much broader network. That would allow it to purchase other airplanes, that it could use for longer haul services. I should add that, as we go through these scenarios, we can't forget that another air carrier arrived on the scene. Started by a bush pilot out of Yellowknife who had a vision, and his vision was simply to become a bigger and bigger bush pilot and then to move on to larger equipment. This was Max Ward, who created Ward Air. As Pacific Western, and he did a very good job in the charter field, lots of stories about Ward Air and his method of developing charters. I suspect that will be a tale perhaps for another day. Pacific Western needed to expand. The question was, how was it going to become bigger? Now, the relationship between Reese Eaton and Claude Taylor, the CEO of Air Canada, was a pretty strong one. Claude Taylor, just to stop for a moment, he was one of the amazing, outstanding leaders in the aviation field in Canada. He was a competitor, he started at the ticket counter and worked his way up to CEO, but he had a heart. Just one quick story, when Transair was really on the ropes, that was before we bought them, the leader Saul Kenny was meeting with Claude, and they were discussing the outstanding accounts that Transair had with Air Canada. Claude Taylor recognizing that, he said, here's the account right here, this is what you owe us. He opened his drawer, and he just put it in his drawer. So Saul didn't have to worry about it for a period of time. In any event, the Reese's relationship, Reese Eaton the CEO of Pacific Western, his relationship with Air Canada's, Taylor, was very good. Looking to expand, we sat down with Air Canada and we came up with this very interesting idea, because we needed to expand either at the expense of Air Canada or at the expense of Ward Air or at the expense of Canadian Pacific.
Peter Wallis: [00:39:48] There were a group of us that got together, and a plan that few people know about, and now more are going to know about it, was to create a relationship between PWA and Air Canada, which would be lifelong and very solid. The plan was, simply, to rebrand Pacific Western as Air Canada West, and Air Canada would therefore cease operations on its routes in Western Canada, which would give the expansion requirements of Pacific Western. Ultimately, that focus would aim literally at Canadian Pacific as well. That was the plan, and it was moving along until Air Canada decided they couldn't do it because it would mean significant layoffs in Western Canada. We agreed there would be significant layoffs, but that's what happens when airlines come together. There are layoffs and people lose their jobs. There's plenty of experience in that across the world and even still today. That particular deal failed. That left the airline and Reese Eaton, in particular as a leader, scratching his head as to, what are we going to do to get bigger? What are we going to do?
Peter Wallis: [00:41:11] One of the relationships that he had, as well, was with a fellow by the name of Tony Ryan. Ryan ran a company called Guinness Peat Aviation based in Ireland, and it was an aircraft leasing company. Guinness Peat was huge. Tony Ryan started Ryan Air, which his son now operates, but that wasn't their main business. Their main business was leasing airplanes. They leased a number to Pacific Western. This is commonplace today, it was really the first time that this was done on such a large scale. Eaton decided, and Tony Ryan agreed, Pacific Western, you've got a fleet of 26 airplanes, why don't you sell 13 of them to Guinness Peat Aviation and we will give you X amount of cash, and then we'll immediately lease them back to you to operate. You will pay the lease payments, obviously, but then you're going to have this cash to go off and do something with.
Bryndis Whitson: [00:42:18] Right, and then they've got extra airplanes, too.
Peter Wallis: [00:42:21] Well no, the same airplanes, just a new owner. Now what used to be owned by Pacific Western is owned by GPA, but they lease it back to us and we get the cash. Well, what would we do with the cash? It was a lot of cash. Reese Eaton decided it was time to go and talk to some folks at Windsor Station in Montreal, the Canadian Pacific, and just see how keen they were to keep their airline operating from an ownership perspective. It soon became clear that they were willing to do a deal. They used the cash from the sale leaseback to purchase Canadian Pacific. Which meant we not only purchased the domestic services, but we also purchased the international services, which were really significant. Some people wonder today, why was Canadian Pacific operating all these routes over the Pacific? How did that come to come to be? That in itself is a bit of a story, because Canadian Pacific's CEO of the day decided that he also had to expand because he wasn't able to expand domestically. He could only, ultimately as a result of this Wheatcroft report, he was allowed two frequencies across Canada. That hardly made any sense. Grant McConachie was famous for two things in his office. He was famous for his insight, his bravado, his financial acumen, but the other two things are was the globe that sat in his office and a piece of string.
Peter Wallis: [00:44:12] The piece of string was measured to reflect the number of nautical miles that the airplanes in his fleet could operate. He applied that piece of string from Vancouver, using great circle routes over the globe, to points in the South Pacific. To points in Asia. He had the aspiration to serve Australia, to serve New Zealand, to serve Japan. This was just immediately after the war, and he made application, but the folks in Ottawa who clearly had Air Canada as their chosen instrument of international expansion, said to Air Canada, this guy wants to serve these routes, do you want them? Canada said no, so they were awarded to Canadian Pacific. That's how Canadian Pacific got all its routes. Ultimately, it got some access into Europe but pretty secondary access. Instead of going to London, they were given Amsterdam. But Amsterdam, with the rights which the Dutch gave them, without getting into the arcane area of international trading rights, we have to understand that any airplane that flies between Canada and another country flies pursuant to an air services agreement. Those agreements are negotiated by officials of each country, with the airlines as observers. Not only observers, but advisors, because the chief air negotiator needs to understand the benefits of negotiating for this route versus another route. In any event, Canadian Pacific did have those routes, and when we acquired the airline, these routes were a very valuable asset. I had the opportunity to be responsible for the expansion of these international routes from my regulatory perspective, because I inherited the whole team that did these negotiations. It was a case of me learning from these professionals as to how you go about trading these 'horses', because that's really what you were doing, was trading horses.
Peter Wallis: [00:46:41] If you're dealing with country A, you know that you're applying to have your one airline, but the other country, country B, is going to have its airline service Canada. Then the question is, is there room for two carriers in these markets? Two Canadian carriers means two foreign carriers, or additional benefits and routes for the carrier from the other nation. I then started getting into this sort of 'horse trading', and it was a very interesting field, something I didn't know a great deal about. We then have to go back to where we took over Canadian Pacific and had to come up with a name. The logic was, Canadian Pacific was owned by Canadian Pacific, and we didn't want that name because it was owned by the Canadian Pacific Railway. What about Canadian Airlines International? Think about that. C-I-A. If you're flying under the name of CIA, that doesn't go well in some countries. So we abandoned that one pretty quick. Canadians see, Canadian Airlines International was what it became. It was always very interesting because our colleagues at Air Canada never referred to us as Canadian. The record will show that they always referred to us as 'Kale'. Now, whether that's a somewhat obscure vegetable, that's another story. But let's just get back to the expansion. We now have a series of routes which we start to develop. My role was also to determine what other routes we should be serving in conjunction with the marketing folk. We saw a few routes which we thought were pretty good, and we thought they could withstand competition of a traditional Canadian carrier, in addition to Air Canada and Air Canada had aspirations. Now all of a sudden, the Pacific is starting to look good to them, which they gave up many years ago because they were beaten out by a man with a globe and a piece of string. But now these are looking pretty good.
Peter Wallis: [00:49:16] The minister's office in Ottawa was besieged by folks like myself and my counterpart, Michel Fournier, at Air Canada for access to each other's routes. That became a little problematic, because the bureaucrats saw this as something that would just create chaotic relationships with other countries. The minister one day called us in and said, in his broad Newfoundland accent, there's a problem. If you can't fix it between yourselves, I will. A little unfair, I suppose, the last thing you really want is a minister making decisions based on economic rights and revenue opportunities. It has to be done in a manner that makes sense to everybody, so we took up that offer. No one talked about competition policy or anything, the Minister of Transport said, sit down and figure it out, so we did. I'd like to say like two medieval popes, we divided the world between us. We got the blessing of our senior management, and that was the deal. It was announced by the minister. The minister announced our deal because that's what ministers do. It looked pretty good. Everybody thought they'd got the better deal, until they realized they didn't get the better deal. That's when those sort of things started to fall apart. Air Canada became a little more aggressive in getting routes into the areas that they'd otherwise agreed they wouldn't serve. The history of the airline goes on from there, through a series of air wars, which I don't think we'll think we'll get into today. There's a lot of toing and froing, but ultimately ended up with Canadian Airlines accessing critical funding. Not from the government, not at all from American Airlines to purchase a 25% interest in Canadian airlines, which kept it afloat. But that'll be a story, perhaps for another day.
Bryndis Whitson: [00:51:34] Yes, which will be good. There's so many of those, as one airline evolves into another and falls into another, there's those kind of pieces that grow or contract.
Peter Wallis: [00:51:51] The whole history of airlines in this country has been one of acquisition, but it's also been an example of great entrepreneurship. Look at at Ward Air, he fought the bureaucracy in Ottawa for so many years. Partly because the process he put in place for acquiring passengers, under the so-called affinity charters, was a little suspect. He'd probably be the first to admit it, and probably does so in his book. He was not the poster child in Ottawa of a citizen that plays by the rules, and for that he is to be commended. I got to know Max Ward quite well because we acquired Ward Air. He got to sit on the board, he was a voice of wisdom and a great guy.
Bryndis Whitson: [00:52:54] I think that's the perfect start of talking about all of those different stories, because that's what makes this entire industry that much more fascinating. There's a lot of fun opportunities and moments within supply chain, logistics, transportation, et cetera, that it's part of the reason we both love it so much.
Peter Wallis: [00:53:18] Absolutely.
Bryndis Whitson: [00:53:19] Thank you so much, and to be continued, I'm sure.
Peter Wallis: [00:53:22] My pleasure, thank you.
Bryndis Whitson: [00:53:26] Thank you for listening to this Zebras to Apples podcast episode. I hope you enjoyed the showcase of the fun and fascinating stories of supply chain logistics. If you like this episode, I would love it if you could give it a rating and review. For more information about this topic, you can go to ZebrasToApples.com or follow Zebras to Apples on the social media platform of your choosing, whether that's Instagram, Facebook, Twitter/X, BlueSky or LinkedIn. You can support the show on Patreon. Also, check out the show notes below. Please join me again for another episode of Zebras to Apples. Have a wonderful day!