The problem is that if the industry has the only expertise regarding safety, then Transport Canada largely becomes an outsider. If Transport Canada doesn't itself have in-house expertise that is at least equally capable of evaluating the mechanisms and the provisions the industry provides through SMS, then it's not possible for the government to know whether it's working or not.
I'm sorry to refer back to a different mode, but the British government had absolutely no idea how bad the situation was becoming in railway maintenance in the U.K. until the Hatfield crash and its associated fatalities, which revealed that virtually the entire railway network in Britain had to have very severe speed restrictions applied for many months while deferred maintenance problems all over the country were addressed.
The problem was that the national bureaucracy that had previously existed under a nationalized railway, with the expertise to deal with railway maintenance issues, had not been replaced with enough expertise to at least maintain a government oversight of how well the industry was policing itself. There was no longer the knowledge at the government level to really look critically at that self-regulation of safety and maintenance that the railways were practising.
The railways, when they were privatized, got all the experts. Those experts, over time, retired and were not replaced. The bottom line was the ruling factor; maintenance practices were downgraded, and the government didn't see it coming until it was time to mount a full-scale inquiry to find out why the country's rail network had collapsed.
Fortunately, the airline industry hasn't gone that way, and should not go that way. This must be done in a rational and controlled way that ensures that government oversight is maintained as you devolve self-regulation of safety processes.