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Airline Insider-Sept/Oct 06

Industry News.


September 27, 2007
By Brian Dunn

Topics






JAZZ BACKS AWAY FROM CITY CENTRE

Air
Canada Jazz’s plans to resume operations at Toronto City Centre Airport
(TCCA) on August 28, with a beefedup service to Ottawa and a reinstated
service to Montreal, have been put on hold.

That’s because the
Toronto Port Authority (TPA), part operator of the airport, denied
approval of a sublease between Jazz and Stolport Corp. from where the
airline planned to operate. The TPA refused approval because it already
has an agreement with Porter Airlines which is due to fly the routes.

There
seems to be a lot of bad blood between Jazz and the TPA and Porter with
all sorts of accusations flying back and forth. For example, in a
letter to Jazz president and CEO Joseph Randell, the carrier was
chastised for reducing service or completely eliminating some routes
from TCCA before Porter announced plans last Feb. 1 to launch a new
service. It was also raked over the coals for allowing “its facilities
to become outdated” and “flatly refused to participate in the
revitalization of the TCCA.”

Jazz denied all those allegations
and said it was forced to delay resumption of operations at TCCA due to
the “intransigent actions” of the TPA, but “remains committed to
returning to the Toronto City Centre Airport as soon as possible.”

And
how does Porter Airlines feel about all this? “Porter is willing to
make the type of long-term commitment to the airport that Air Canada
never has,” said airline founder and boss Robert Deluce. “We are the
only scheduled airline in the last 20 years willing to make TCCA its
operating base.” Deluce said he wasn’t surprised when Air Canada
announced plans to rejuvenate its operations out of TCCA, noting it was
built into Porter’s business plan. “That’s so like Air Canada, to do
nothing for years and years and then when someone else identifies a
market as being worthwhile, they suddenly become protective about it.”

Jazz
was planning to offer 10 return trips to Ottawa and seven to Montreal
during the week and three return trips on Sunday to Ottawa and two to
Montreal. It suspended operations earlier this year after receiving an
eviction notice from City Centre Aviation Limited (CCAL) for
renovations on the terminal building. At the time, Jazz operated
flights between TCCA and Ottawa five days a week and was planning to
augment its service to Ottawa and resume flights to Montreal.

Porter
Airlines, which owns CCAL, plans to launch short-haul Bombardier Q400
service this fall from TCCA, ultimately serving 17 cities in Quebec and
Ontario, six American states and Washington, DC, all within 90 minutes
flying time or 800- kilometre radius of TCCA. It expects to have four
Q400s in service by year-end and a total of 10 by the end of next year.
It also has an option on another 10 aircraft. Porter’s initial service
will be Toronto-Ottawa with 10 return flights a day, followed by
Montreal, New York and Chicago.

AIR CANADA UNION AWARDED RAISES
An
arbitrator has awarded small pay raises to 5,540 unionized sales and
customer service employees and crew schedulers at Air Canada. The
workers, represented by the Canadian Auto Workers union, got a 1 per
cent hike in July and will get another 1.75 per cent next July and
again in July 2008. Talks with other airline employees are either
ongoing or have moved to arbitration.

The airline and union went
to salary arbitration as part of an agreement that lifted Air Canada
out of bankruptcy protection. The agreement allowed workers to recover
some of the wages they lost during restructuring, once the airline
returned to profitability, but does not allow workers to strike.

WESTJET’S NET INCOME SOARS
WestJet
Airlines recorded second-quarter net income of $22.4 million, a 10-fold
increase from the $2.3 million posted in the same period last year. The
increase was produced on a 30.3 per cent growth in revenue to $425.4
million, while expenses increased 20.9 per cent to $386.8 million.
Secondquarter operating income rose to $38.6 million from the $6.6
million recorded a year ago.

WestJet’s second-quarter capacity
was a little over three billion available seat miles, an 18.5 per cent
year-on-year growth, while traffic increased 29.3 per cent to 2.326
billion revenue passenger miles.

“We have completed a profitable
first six months of business for 2006 with strong second-quarter
results. Among our many accomplishments, a significant highlight for
this period was our ability to continue to add capacity and still
generate increased, and in most cases record-breaking, load factors,”
said president and CEO Clive Beddoe.

“Of greater significance,
we transitioned 13.5 per cent of our total capacity during the
three-month period ending June 30 from our winter schedule of charter
and sun destinations to our Canadian domestic operations. This
represents the largest single increase in domestic flying in our
10-year history and the largest seasonal reallocation of capacity we
have ever undertaken.”

However, there are still some potential
problems. “The cost of jet fuel obviously remains a concern to us,
however we are able to absorb these exceptionally high prices as our
fuel costs have been offset by the strong Canadian dollar and the lower
fuel burn associated with our young fleet of [Boeing 737] aircraft,”
said Beddoe. “Our accomplishments and growth will carry into the next
three months, which is traditionally our strongest quarter for domestic
travel.”

WestJet plans to lease four Boeing 737s from Singapore
Aircraft Leasing Enterprise. The airline will take delivery of one
737-700 in November 2007, one 737-800 in the next four months, and two
more – 700s in second quarter of 2008.

WestJet also has options
on three -700s and one -800 for delivery in 2009. The – 700s can be
changed to -800s. The deal is subject to a number of unspecified
conditions.

“As WestJet successfully executes its strategic
plan, the delivery of these aircraft is key to our growth in the coming
years. The foreseeable future indicates many opportunities for
increasing frequency and expansion into new routes and new
destinations,” said Sean Durfy, the airline’s executive vice-president,
marketing, sales and airports.

WestJet currently operates 57 aircraft. With scheduled deliveries, this will increase to 76 B737s by the end of 2008.

ACE NET INCOME UP TO $236 MILLION
Air
Canada’s parent, ACE Aviation Holdings Inc. (ACE), also turned in an
impressive performance, with net income of $236 million for the second
quarter compared to net income of $169 million in the second quarter of
2005. ACE reported operating income of $181 million for the quarter,
despite a fuel expense increase of $101 million or 19 per cent over the
second quarter of 2005. Operating income increased by $3 million
compared to the second quarter of 2005. Net income includes foreign
exchange gains of $107 million (2005 losses of $53 million).

The
2006 quarter also included a pre-tax gain of $100 million ($83 million
after tax) on the sale of 3.25 million shares of US Airways. The
non-recurring items in the 2005 quarter, principally related to the
initial public offering of Aeroplan, amounted to $161 million ($143
million after tax).

Passenger revenues were up $188 million or 9
per cent reflecting increases in all markets due to a 3 per cent
improvement in yield and a 5 per cent growth in passenger traffic, on a
capacity growth of 3 per cent. Unit cost, as measured by operating
expense per available seat mile rose 6 per cent from the same period in
2005. Excluding fuel expense, unit cost was up 4 per cent and included
the effect of growth in non-ASM producing businesses.

SKYSERVICE GETS SKED LINK TO PORTUGAL
Skyservice
Airlines has received government authority to introduce scheduled
international service to Portugal. The designation, announced by
Transport Canada, came three weeks after Canada signed a liberalized
aviation agreement with Portugal that allows passenger carriers from
both countries to have unlimited frequencies and unrestricted access to
all markets.

“The designation of Skyservice as a scheduled
carrier provides greater certainty for the carrier, while ensuring
choice for travellers between Canada and Portugal. I am pleased that
the new agreement with Portugal is creating new opportunities,” said
Transport Minister Lawrence Cannon.

Skyservice already operates
a charter service to Portugal and will turn some of those flights to
Lisbon and Faro into scheduled service once a week. The airline
operates a combination of Airbus A319s, A320s and Boeing 757-200s. Last
year, Transport Canada granted the airline scheduled rights to serve
Moscow, but no startup has been set, according to an airline
spokesperson.


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