Airline Insider-January/February 07

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Airline Insider-January/February 07

Written by Brian Dunn

PROMISING OUTLOOK – 2007
The outlook for international travel in 2007 is promising, but less so for the domestic market, according to industry analyst Fadi Chamoun of UBS Securities Canada in Toronto. “We’re very bullish on the global long-haul business for 2007, because corporate spending will remain strong. As for the domestic market, we’re less bullish due to more supply coming onto the market. I believe WestJet plans to boost capacity by 14% and Air Canada by between 2-3%.”

A UBS survey of US corporate travel managers revealed that the vast majority do not expect a change in their companies’ travel policies in 2007, a positive sign since travel policies are usually the first cuts in a weakening economy. The wild card is always the cost of oil, but even at $65 a barrel, UBS said most airlines should do well this year.

This could also be a year of transition for both WestJet and Air Canada, according to Douglas Reid of Queen’s University’s Business School. “I suspect this will be (WestJet founder) Clive Beddoe’s last year on the job. It’s now time to see a change there, as the company is getting too big for a founder. I also think (Robert) Milton will leave Air Canada. He won’t get pushed, but he may feel he’s done enough good and it’s time to move on.”

And 2006 was another year of confidence in the industry as there was nothing fearful driving people out of the market, says Reid. In addition, he sees 20-25 years of steady growth as more and more people from the boomer market retire and spend more time travelling.

BLUE SKIES INITIATIVE
Canada’s major airlines have embraced Ottawa’s “Blue Skies” initiative, which will see the federal government pursue more liberalized air services agreements with foreign governments and give Canadians more options and access to lower fares. But while Canadian carriers support “Blue Skies,” they also want Ottawa to address the issue of uncompetitive costs and fees that face Canadian carriers.

“Air Canada has been supportive of a liberalization of Canada’s international aviation agreements provided it is done on an equitable and reciprocal basis,” says Sean Menke, executive vice-president and chief commercial officer of Air Canada.

Menke added that as part of ensuring a level playing field, it is essential that the federal government also take meaningful action on the issue of unequal costs imposed on Canadian carriers by monopoly infrastructure providers, such as airport authorities.

An independent study conducted by the Montreal Economic Institute underscores the competitive disadvantages faced by Canadian carriers resulting from some of the highest airport, security and fuel excise charges in the world.

Both WestJet and Air Transat echo the sentiments expressed by Air Canada, calling for a level playing field. WestJet says that two fundamental issues must be dealt with, namely that Canadian carriers get fair access to foreign airport terminal facilities in future bilateral agreements and the issue of uncompetitive taxes and fees be addressed.

Air Transat parent Transat A.T. also welcomes Ottawa’s plan to liberalize Canada’s international air policies, but adds that the current economic and tax framework needs to be overhauled.

WESTJET EXPANDING ITS FLEET
WestJet Airlines is to lease up to nine more Boeing 737- 700/800 aircraft from Singapore Aircraft Leasing Enterprise (SALE) to facilitate its continued expansion in 2009, when its current fleet delivery schedule will end. The carrier currently has a registered fleet of 62 B737s, with committed deliveries scheduled through to 2009. A number of these aircraft are covered in an earlier deal with SALE.

Under its latest term sheet with the Singapore leasing firm, four 737-700s will be delivered to WestJet in January, May, June and October of 2009, as well as one -800 in May of that year.

WestJet also has the ability to secure an additional three -700s and one -800 in 2009. The -700s can be changed to -800s. Finalization of the transaction is subject to a number of conditions.

“One of our continued strategic drivers is ASM [available seat mile] growth through fleet expansion,” says WestJet president Sean Durfy.

He adds, “having recently announced our most profitable quarter in history with increases in capacity, load factor and yield, we are confident the demand for WestJet’s service in the domestic, transborder and international Caribbean markets will support the addition of these aircraft.”

By the end of 2009, WestJet’s registered fleet will comprise 81 B737s.

WESTERN AND ATLANTIC CANADA – NEW SERVICES
With all that oil money out west comes a demand for new services and Air Canada has obliged by offering a new non-stop seasonal service between Calgary and Fort Lauderdale with three flights a week on a 120-seat Airbus A319 aircraft in either executive or economy class.

Air Canada has also launched a new non-stop service between Edmonton and London Heathrow. The flights are operated on a 211- seat Boeing 767-300ER aircraft in executive or economy class, with new lieflat beds in executive class. “By next summer, Air Canada will offer up to 15 daily flights to the UK from Vancouver, Calgary, Edmonton, Toronto, Ottawa, Montreal, Halifax and St. John’s.

Following the demise of Canjet’s scheduled service, Air Canada and Air Canada Jazz are also boosting capacity in Atlantic Canada by 16%, or more than 10,000 additional seats per week compared to last winter. The airline is adding 21 more nonstop flights per week during peak travel time to and from and within Newfoundland/ Labrador for a total of up to 298 flights. Additional capacity is being added between St. John’s-Toronto, St. John’s-Montreal, Deer Lake-Montreal and Deer Lake-Halifax.

New Brunswick has 27 more non-stops flights per week for a total of up to 436 weekly flights. The main city pairings are Moncton- Toronto, Moncton-Halifax, F r e d e r i c t o n - To r o n t o , Fredericton-Montreal and Saint John-Montreal. Nova Scotia will see 73 more nonstop flights per week added for a total of 674 weekly flights.The main links are Halifax-Toronto, Halifax- Montreal and Halifax- Ottawa.

CANADIAN CARRIERS
Air Transat has won government approval to operate scheduled service to Austria and plans to introduce the service in May, initially offering flights on a seasonal basis and eventually converting to year-round service “based on market demand,” according to Transport Canada. The Montreal-based carrier operates a fleet of 15 Airbus A310s and A330s.

“Canada’s new government is committed to expanding access to foreign destinations for Canadian carriers,” says Transport Minister Lawrence Cannon in a statement. “I am pleased that Air Transat’s designation will provide additional airline choices for Canadians travelling between Canada and Austria.” The award was made possible through an existing air transport agreement between Canada and Austria.

Air Transat will also offer direct flights to London Heathrow from Toronto Pearson on behalf of Transat Holidays in Canada and Canadian Affair in the UK, both Transat subsidiaries, starting in May. The UK remains the largest Europe- Canada market for tourism, and the second foreign market overall for Canada, after the US. Each year, approximately 800,000 British tourists visit Canada.

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