Air Canada to cram 20 per cent more seats on budget carrier

Picture courtesy BCIT Commons

FANCY sitting in an aircraft with 20 per cent more seats than what you were used to on an Air Canada flight? Of course, you would expect to pay less for the smaller space.

That’s just how Air Canada’s new low-cost airline to be launched in 2013 will look like, serving transatlantic and leisure routes in the United States and the Caribbean. About half the incremental profits, according to Air Canada chief financial officer Michael Rousseau, will come from cramming in more seats, with the rest to be derived from lower employee wages and more flexible work rules.

The new discount carrier will be wholly owned by Air Canada but will carry a different name. It will operate a fleet of 20 Boeing 767s and 30 Airbus A319s.

Air Canada may be a Johnny-come-lately in the game, but it is better late than never if it means moving for the better. The airline is adopting a defensive approach in the leisure market, and consequently some of the routes that Air Canada is operating will flip to the low-cost carrier. Mr Rousseau said: `The majority of the transatlantic routes will be in fact growth routes for us that we think we can make adequate if not very strong returns.”

Indeed, many budget carriers thrive on offering cheap fares to leisure destinations, usually secondary ports, since this class of travellers are generally more concerned about getting from point A to B than about the in-flight service. Brand loyalty is of little importance in the choice of airline. It is also a domain of charterers because of the seasonal nature of the travel. This means Air Canada will be competing with the like of Air Transat, and it also means its regular customers may start looking at more comfortable alternatives.

Mr Rousseau said Air Canada has studied different models around the world, citing as an example the Qantas/Jetstar relationship. The Australian flag carrier has been pushing the brand of low-cost Jetstar with commendable success across Asia, setting up bases in Singapore, Japan, Vietnam and, pending approval, Hong Kong. But Jetstar is more like an extended arm of Qantas, operating short regional routes of up to five hours. The long haul is quite a different story if Air Canada is thinking of Europe and, it is said in the longer term, Asia.

Air Canada may have also looked at how Singapore Airlines too has a stable of subsidiary airlines that include regional carrier SilkAir and budget carriers Tiger Airways and Scoot. A possible pitfall here is how if there is little differentiation between the parent airline and its subsidiary offshoots, the competition may bite inwards.

When Mr Rousseau said the discount carrier “is a very exciting initiative, not just for Air Canada, but for our employees as well…” and went on to talk about how the new offshoot would benefit from lower staff costs and flexible work rules, you flinch as you recall how its pilots had opposed the start-up. Absurd as it may sound, is this excuse to get round an industrial issue?

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About David Leo
David Leo has more than 30 years of aviation experience, having served in senior management in one of the world's best airlines and airports. He continues to maintain a keen interest in the business, writes freelance and provides consultancy services in the field.

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