Wings Magazine

News
Continued competition in travel market

NEWS HIGHLIGHT

Continued competition in travel market
Canada's two biggest airlines both saw a bump in passenger traffic during August compared to a year ago, but the planes they have been flying haven't necessarily been fuller.


September 7, 2010
By The Canadian Press

Sept. 7, 2010, Calgary – Canada's two biggest airlines both saw a bump in
passenger traffic during August compared to a year ago, but the
planes they have been flying haven't necessarily been fuller.

The traffic load figures Tuesday by Montreal-based Air Canada
(TSX:AC.A) and its Calgary-based rival WestJet Airlines (TSX:WJA)
reflects continued competition in the travel market. The industry's
finances are improving as the economy recovers and business travel
comes back. But airlines still face stiff competition on fares,
especially on the domestic side as bargain-hunting consumers shop
around on the Internet for the lowest prices.

Air Canada said its revenue passenger miles, a measure of seats
sold in relation to miles flown, rose 7.1 per cent last month from a
year earlier.

The Montreal-based airline's load factor _ the percentage of
passengers in seats, essentially _ was flat year-over-year at 86.8
per cent. System-wide capacity, meanwhile, increased seven per cent.

Advertisment

That includes results from regional airline Jazz (TSX:JAZ.UN),
from which Air Canada buys capacity.

"These record load factor results were achieved as we continue
to increase utilization of our existing fleet and leverage
effectively our hubs and global network,'' president and CEO Calin
Rovinescu said in a statement.

"This is our ninth consecutive month that we have recorded
year-over-year traffic increases.''

WestJet Airlines, Air Canada's rapidly expanding competitor, said
its traffic rose 8.2 per cent.

The carrier's load factor was 82.2 per cent, compared to last
August, when 84.5 per cent of its seats were filled. Capacity
increased a hefty 11.3 per cent.

"We continue to direct the majority of our new capacity toward
our southern destinations, as we find the demand for leisure travel
continues to be robust," said Gregg Saretsky, president and CEO of
the Calgary-based competitor.

"Additionally, our increased focus on the business travel
segment, a key part of our growth strategy, has begun generating a
positive response from corporate sales."

Airline industry analyst Rick Erickson said while it's
encouraging to see demand pick up for air travel, Air Canada and
WestJet aren't squeezing as much money out of each customer as they
did three or four years ago.

"Unfortunately for both of our carriers, the yield has not
returned, especially in the domestic market place," he said.

"They don't have as high a revenue as they did a couple of years
ago."

In this day and age, when customers can quickly compare fares on
both websites, airlines need to keep close tabs on what their rivals
are charging.

Travellers are more motivated by convenience and price than by
any bells and whistles either airline happens to offer, Erickson
added.

"There's a price threshold that Canadian domestic consumers
don't seem willing to cross," he said.