Porter Airlines to challenge Air Canada and WestJet

CANADA’s short-haul operator of two-hour flights, Porter Airlines, looks set to compete with the country’s largest two airlines – Air Canada and WestJet – for the longer haul across Canada and beyond to the United States and the Caribbean. Likely destinations include Los Angeles in the US and Vancouver, Edmonton, Calgary and Winnipeg in Canada, to be reached from its present base in Toronto – Billy Bishop Toronto City Airport.

Porter chief executive Robert Dekuce said: “It’s now time to spread our wings and look at some destinations that are little further out.”

Porter plans to acquire new and bigger jets – 12 Bombardier CS100 with options for 18 more – which are more powerful, quieter and have a longer range than its current fleet of turbo-props. The order cost C$2.29 billion (US$2.26 billion), and the first of these aircraft will only be available in 2017.

Courtesy Facebook

Courtesy Facebook/Porter Airlines

However, the plan is contingent upon approval by the federal government, the City of Toronto and the Toronto Port Authority to allow the new jets to land and take-off at Billy Bishop. This means extending the airport’s main runway by 168 metres at each end. Additionally, the terminal would have to be expanded to accommodate the new aircraft, and the increased frequencies and loads.

Air Canada and WestJet are enjoying good loads on the main trunk routes, and there is certainly room for increased competition which will provide air travellers with more options.

As for Air Canada, according to spokesman Peter Fitzpatrick, the national airline is seeking access to Billy Bishop as well. Further investments by the authorities should be premised upon opening its doors to other airlines as well.

Four more airlines go green – Porter, Air Canada, Aeromexico and GOL

IT is good news when yet another airline makes the effort to go green. This time, under the auspices of the International Civil Aviation Organization (ICAO), four airlines participated in four connecting flights from Montreal to Rio de Janeiro, each using different types of sustainable biofuels. Dubbed the Perfect Flight, operated by Porter Airlines, Air Canada, Aeromexico and GOL, it departed Montreal at 1130 hours on June 18 and arrived in Rio at 1400 hours a day after.

Picture courtesy The Vancouver Sun

Air Canada, which operated the second leg from Toronto to Mexico City, expected its flight to generate at least 40 percent fewer emissions by using jet fuel derived from recycled cooking oil and through other fuel-saving measures such as fuselage wash and wax to improve aerodynamics, installation of lightweight aisle carpet, streamlining push-back procedures to reduce fuel usage, taxiing aircraft to runway with one engine, minimizing taxi time to runway, reduced thrust takeoff, and optimized climb to optimal cruise altitude.

Air Canada executive vice-president and chief operating officer Duncan Lee said: “Air Canada fully accepts its responsibility to reduce its footprint and our first flight using biofuel tangibly demonstrates our ongoing commitment to the environment. Since 1990 our airline has become 30 percent more fuel efficient and we are determined to increase these gains through cutting-edge measures.”

Indeed with increasing pressure from environmental groups and following the controversy of the European Union’s carbon trading scheme which some nations and their airlines have voiced their objection to, there is an urgent need to find an acceptable global solution. Lest the industry becomes embroiled in messy disputes that could result in unnecessary and damaging retaliatory actions by the parties concerned, ICAO will have little choice but to play a more active role in pushing the agendaSo said Airbus President and CEO Fabrice Bregier: “To make this a day-to-day commercial reality, it now requires a political will to foster incentives to scale up the use of sustainable biofuels and to accelerate the modernization of the air traffic management system. We need a clear endorsement by governments and all aviation stakeholders to venture beyond today’s limitations.”

Canadian airlines report improved loads

CANADA’s largest two airlines – Air Canada and WestJet Airlines – reported better loads in June compared to a year ago.

Air Canada’s load factor rose to 85.6 per cent from 84.2 per cent a year ago when the airline suffered a strike by customer service agents. However, the improvement was also due to the increased passenger traffic by 1.5 per cent while at the same time the airline had trimmed capacity by 0.1 per cent.

In the same vein, WestJet’s improved load factor from 75.7 per cent to 79.0 per cent was the result of passenger traffic increase by 6.7 per cent outpacing capacity increase by 2.3 per cent.

Adjusting supply to better reflect the market’s demand has been a strategy that many airlines usually resort to in a sluggish market. As the industry continues to face uncertainty globally, the real stability test is in the months to come after the summer peak travel season. However, WestJet president and CEO Gregg Saretsky expressed confidence of the positive trend continuing. He said: “Advanced bookings for July and August remain strong.”

Air Canada president and chief executive Calin Rovinescu too was confident about the airline achieving its first profit in years, although the airline last reported a net loss for the quarter ending March 31 of C$210 million (US$207 million), which was 11 times higher than the C$19 million loss in 2011. He said the record load factor for June was the result of a “strategy to manage capacity to ensure high efficiency.” Indeed, the keyword is “efficiency”. Hopefully Air Canada’s labour problems are a thing of the past.

Canada’s regional carrier Porter Airlines, however, saw its June load factor dropping from 64.6 per cent to 62.0 per cent, but the airline maintained that the numbers “met our expectations”. This was because the higher number last year benefitted from a strike by workers at Air Canada. Also, while traffic grew 4.1 per cent, capacity went up higher by 8.5 per cent.

But all is not rosy for charter airline Air Transat, which posted a second quarterly loss of C$26.2 million. This would reduce the operator’s hope of returning to profitability this year, as the company’s president Jean-Marc Eustache admitted: “It doesn’t look like it’s happening, is it?” Mr Eustache is now eyeing Asia as the European market continues to lose its lustre. This would be in competition with Air Canada, which has already announced plans for a low-cost carrier to the region. But Mr Eustache insisted that Air Transat is a tour operator, not an airline.

Full airfare disclosure: Canadian airlines take the lead

CANADIAN carriers have taken the lead to disclose full airfare to make it easier for their customers to arrive at the full cost of flying – ahead of the government’s intention to make it mandatory, following in the footsteps of the European Union and United States.

Westjet Airlines was first to advertise fares that show the final cost payable, including all taxes and surcharges such as fuel surcharge, insurance and air security charges and airport improvement fee. This was followed by Air Canada occasioned by a seat sale to mark its 75th anniversary.

Canada’s third carrier Porter Airlines, which operates regional flights from its base at Toronto City Centre airport, said it would follow suit.

Credit to these airlines for not making an undue fuss over what can only be a fair and sensible move in their passengers’ interest. They now have every reason to demand that other airlines operating to and from Canada be not exempt when the rule comes into effect.

Air Canada levies baggage fee, risks losing customers

Travel light, which may be the message if you want to save bucks. But for Air Canada, it has come across as a matter of additional revenue to charge passengers who purchase tickets on Sept 7 and after for travel to the United States a fee of C$25 for the first checked bag. The current charge of C$30 for the second bag will also be raised to C$35. That makes a total of C$60 for two checked bags added to the fare.

Naturally, Air Canada customers are upset. Many of them see it as a money-grabbing move that is not only ill-timed when the market has become extremely price-sensitive but also deceptive. On the one hand, the airline may be advertising a cheap fare of, say, C$99, but it is collecting an additional fee in taxes and other ancillary charges – that can amount to as much as C$150. Only recently was Air Canada fined by the US Department of Transportation for deceptive price advertising online. The Canadian flag carrier did not disclose taxes and fees that would be added to the advertised fares.

US Transportation secretary Ray LaHood ruled: “When passengers buy an airline buy an airline ticket, they have a right to know how much they will have to pay.”

President of the Consumers’ Association of Canada Bruce Cran lampooned Air Canada’s new baggage fee as “another one of their schemes to drag a little more money out of us.”

In defence, Air Canada spokesman Peter Fitzpatrick said: “This new policy puts us in line with the majority of airlines flying in the transborder market, who have been charging for first bags for a long time.” He added; “Everyone understands that airlines are under tremendous cost pressures and I think they can appreciate that we need to take some steps to ensure our financial sustainability.”

Mr Fitzpatrick could be thinking about how US carriers collected US$5.7 billion last year from baggage and cancellation fees alone. But he would be sadly mistaken to think that doing as the US carriers do means better positioning for Air Canada and that its customers would remain loyal.

One, Air Canada would lose its differentiating advantage now that its customers have lost another reason to stick by it. And Air Canada is by no means cheaper to fly by comparison. Already, Canadians living in border towns and cities including the main hubs of Toronto and Vancouver are crossing the border on land and flying out of the US to take advantage of lower fares and taxes.

Air Canada also risks losing customers to compatriots Calgary-based WestJet and Toronto-based Porter Airlines, neither of which said it had plans for a similar first-bag fee. WestJet, which is Canada’s other major airline, charges C$20 for a second checked bag, plus C$50 each for a third and subsequent bag. Porter Airlines, which operates out of Billy Bishop Airport in downtown Toronto, is hopeful that some Air Canada customers may be encouraged to try its service.

Two, Air Canada cannot expect its customers to sympathize with its poor financial performance which best measures the efficacy of its management policies. In its latest financial report for the second quarter of 2011, the airline incurred a net loss of C$46 million, which was in fact an improvement of 85 per cent compared to a net loss of C$318 million year-on-year. It was a result that Air Canada President and CEO Calin Rovinescu said he was happy with, noting its achievement in spite of rising fuel prices and a 3-day strike by airport workers. Mr Rovinescu pledged the airline would “continue to explore additional cost reduction opportunities” and “to increase fares and fuel surcharges where competitively feasible, and to make adjustments to capacity as required.”

The question now is whether imposing a first-bag fee for US-bound and return flights is “competitively feasible.” And, next, whether this signals a levy of more such fees in the offing.

Presently, travellers flying on Air Canada to South America, Europe, Africa, the Middle-East, Asia and Australia do not pay a first-bag fee. But the fee for the second checked bag will be raised from C$50 to C$70 (which has already been in place for Europe and India). While some airlines, largely Asia-based, are still offering free carriage for up to two checked bags, it is unlikely Air Canada can push ahead with a first-bag fee for services beyond North America unless the fee structure is sufficiently changed to reflect the real cost of flying that may actually benefit some travellers without – or seeming to be – unreasonably overcharging others.

Charging for checked baggage carriage is apt to result in a spill-over of bags carried into the cabin although there are rules limiting its number, size and weight. If the situation becomes unmanageable, imposing a fee may be the best limiting measure. Already one American carrier – Spirit Airlines – is charging a fee for carry-on bags. The Detroit-based carrier, which prides itself as America’s first ultra-low-cost carrier, states on its website: “We empower you to save money on air travel by offering ultra low fares with a range of optional services – including bags – for a fee, allowing you the freedom to choose only the extras you value.”

You are what you do or not do. So too the corollary that you do or not do for what you are. Air Canada has to decide.

Interestingly, the move by Air Canada to levy a fee for the first checked bag for travellers to the US comes at a time when the airline is seeking approval from Canada’s Competition Bureau to enter into a partnership with Chicago-based United Continental, the world’s biggest airline. The two airlines would co-operate on a number of trans-border flights that would see a joint-monopoly for some routes. The Bureau has blocked the deal as it views it as a merger in disguise. Air Canada, on the other hand, warned that objection by the authorities would “impede Air Canada’s ability to compete, would have significant adverse effects on Canadian consumers and the development of Canada’s hub airports, and would relegate Canada and Canadian air carriers to a marginalised regional or local status in the international air transportation world.”

However, Canadians have become increasingly concerned about the Americanization of their country’s industries. The first-bag fee may well be trending towards a general practice that airlines, reluctant or unable to raise base fares, are seeking compensation in additional revenue derived from ancillary services. It is a lesson full-service airlines are humbly learning from low-cost carriers, except that it is only one side of the equation. For Air Canada, it is a worse problem of being seen to be carelessly and indiscriminately following a practice just to be in line with US carriers south of the border.