Air Canada considering expanding Rouge brand
Air Canada is so impressed with Rouge that it is considering expanding the discount leisure unit.
August 3, 2016 By Air Canada
Since Air Canada launched the division in July of 2013, Rouge has grown to 44 aircraft, with another five planes slated to join the fleet next year.
Air Canada proposed the creation of the discount leisure division in 2011, later obtaining support from the Air Canada Pilots Association for starting what would be named Rouge.
While Rouge’s growth is limited to having 50 aircraft by the end of 2017, because of collective agreements, the Montreal-based carrier says it’s interested in expanding the unit and plans to hold talks with the pilots’ union when Rouge edges closer to its ceiling.
Air Canada chief executive officer Calin Rovinescu said it’s too early for him to speculate on whether Air Canada will decide to increase the size of Rouge’s fleet, but he welcomed the opportunity to explore the issue. “This has been the great thing that has come out of our relationship with the pilot group – that we can have this kind of dialogue and come out with a win-win scenario,” he said during a conference call on Friday with industry analysts. “There is certainly a business case to be made for it, and we’ll look to have that discussion in the fullness of time.”
Rouge flights include Boeing 767s that fly overseas and the Airbus jets that focus on North America and sun destinations.
The division began service earlier this year on seasonal routes such as Toronto to Prague, Budapest and Warsaw. Other flights include Vancouver to Dublin, and Montreal to Casablanca, Morocco. The unit’s 44 planes consist of 19 Boeing 767s, 20 Airbus A319s and five Airbus A321s, with another five Boeing 767s slated to be added next year.
“Once we get to the 50 or near the 50-level, we’ll have further dialogue and see where that takes us,” Rovinescu said. “We’ve obviously established a great working dynamic with the pilot group. I think that many of our pilots have seen some of the benefits to the pilot group and to the company from having established and deployed Rouge.”
Many Rouge pilots on wide-body Boeing 767s and narrow-body Airbus jets have been able to become captains faster than otherwise possible if they continued to fly with the main line, said Cormark Securities Inc. analyst David Tyerman. Rouge has a lower-wage structure compared with Air Canada, but there are pluses, such as the attraction of gaining promotions relatively quickly.
“Being able to move up the hierarchy faster is the big advantage for the pilots,” he said in an interview. During winter travel season, some of the wide-body aircraft switch to routes into the United States and also sun destinations in Mexico and the Caribbean, Tyerman pointed out. He estimates Rouge now accounts for about 17 per cent of Air Canada’s total available seat miles, which is a measure of capacity.
“My reading between the lines is that Air Canada thinks there is more demand for Rouge-type routes and business than the 50 aircraft,” Tyerman said. On Friday, Air Canada announced a second-quarter profit of $186-million, compared with $296-million in the same period last year. Adjusted share profit in the second quarter of 72 cents a share exceeded analysts’ expectations.
The company’s quarterly revenue climbed 1.3 per cent to $3.46-billion, but its load factor, or the proportion of seats filled by paying customers, slipped to 82.4 per cent from 83.7 per cent. Canada’s largest carrier said its bookings felt the effects of terrorist attacks in Europe. Earnings before interest, taxes, depreciation, amortization and aircraft rent (EBITDAR) reached $605-million in the second quarter, surpassing the former high of $591-million in the same period of 2015. Fuel costs fell to 52.2 cents a litre from 66.9 cents in the year-earlier period.