Low-cost carrier option for Air Canada could hit turbulence

By Michael Garko, In Airline News

Changes have been coming quickly at Canada’s largest airline, as Air Canada looks to find ways to offset the rising price of fuel, while positioning itself better in its competition with rival WestJet.

Air Canada Express took to the skies last week

One change came last week when Air Canada announced it was phasing out its Jazz branding in order to fold all of its regional affiliates under the new “Air Canada Express” brand.  Out of that news came speculation that Air Canada would be launching a new low-cost carrier.

Archives: Air Canada phasing out Jazz branding

Now, Air Canada is debating whether it should introduce a new low-cost airline carrier.  ”We will only proceed with it if we are satisfied it has the scale and scope to truly remain low cost,” chief executive Calin Rovinescu told shareholders at its annual meeting.

Air Canada has made attempts in past years to create a successful low-cost carrier, most recently Air Canada Tango, but none have been able to sustain profitability.  In its latest attempt, plans include to use up to 50 aircraft of two different models.  One narrow-body model would be used to fly to sun destinations like Florida and Caribbean routes, while one wide-body model would be used for flights to Europe.  These leisure routes typically are higher in volume, but provide a lower yield than business routes.  Because of this difference, leisure routes often have different cost structures.

The new carrier could potentially create over 450 pilot jobs and 1300 flight attendant positions according to Air Canada.

Some see the low-cost carrier option as a bargaining tool for Air Canada towards its unions.  All five of Air Canada’s unions would need to approve of the carrier.  According to the Canadian Press:  “The key groups such as pilots and flight attendants would need to accept lower wage rates and different work rules. Other changes, such a seat density and commissions to travel agencies, would help to reduce or eliminate the 30 to 40 per cent advantage that low-cost rivals like WestJet have over legacy carriers.”

Robert Kokonis, president of AirTrav, is skeptical of Air Canada pursuing the low-cost option.  “While the new carrier may create some jobs Air Canada is ”overplaying that card.”  Kokonis thinks that Air Canada could decide not to launch another low-cost carrier, instead using the proposal to leverage concessions from its employees.

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