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Purser: Air Canada faces the facts

So the fuel-price cudgel that has been battering U.S. airlines has finally been seriously felt by Air Canada. The blows can no longer be countered merely by fuel surcharges and charging for a second checked bag (some U.S. carriers are now charging for any checked bag). Air Canada has admitted that it is going to have to cut back seriously on its own infrastructure, eliminating up to 2,000 jobs and reducing route capacity by seven per cent for the fourth quarter of this year and the first quarter of 2009. And “if fuel prices remain at current levels,” CEO Montie Brewer said on June 17, “we can anticipate further capacity reductions.”

The Prince George-Calgary route had already been axed two weeks earlier, so that Prince George travellers now have to fly to Vancouver before heading for any points east. In the couple of weeks following Brewer’s announcement, word of further cutbacks began to trickle out: all Hamilton, Osaka, Port of Spain and Sacramento service cancelled; Calgary-Comox and Montreal-Deer Lake service cancelled; Calgary-Palm Springs and Ottawa-Orlando winter service cancelled; Montreal-San Francisco, Toronto-Kelowna, Toronto-Madrid and Toronto-Rome service suspended for the winter season; flight frequencies sharply reduced on the Toronto-Tel Aviv, Vancouver-Beijing and Vancouver-Shanghai routes.

This, of course, is just the beginning. But since the capacity reductions announced in June were uneven – only two per cent on domestic routes and seven per cent on overseas routes, but a hefty 13 per  cent on transborder routes – the forthcoming cutbacks are going to be most severe on services to the U.S. So far, only one U.S. destination – Sacramento – has been wiped off the Air Canada map completely. Will there be others, or will the target be achieved by flight frequency reductions?

Air Canada is the biggest player in the transborder market. Not counting doomed Sacramento, 50 U.S. airports are listed in the Air Canada timetable. Eight of these, all in the northeast, are served for Air Canada only by Air Georgian’s Beech 1900Ds. The others are served by Air Canada itself or its Jazz affiliate.

That’s 42 airports – quite a formidable list. But there used to be even more. Some fell by the wayside in the years after 9/11/01. Most of these were places that might seem marginal to Canadian eyes, but at least one major city was dropped; New Orleans lost its service from Toronto. (When this writer was in New Orleans a few months ago, Air Canada signage was still evident around the airport, but there were no flights.)
The 42 airports? Alphabetically, they are Anchorage, Atlanta, Austin, Baltimore, Boston, Charlotte, Chicago, Cleveland, Columbus, Dallas, Denver, Detroit, Fort Myers, Hartford, Honolulu, Houston, Indianapolis, Kahului, Kansas City, Las Vegas, Los Angeles, Miami, Milwaukee, Minneapolis, Nashville, New York (three airports), Orlando, Philadelphia, Phoenix, Pittsburgh, Portland, Raleigh, Richmond, San Diego, San Francisco, Seattle, St. Louis, Tampa and Washington (two airports).

Which do you think are most expendable? When Air Canada fully decides where it is going to cut back, we know it is going to be on the weakest routes. As Montie Brewer said, at current fuel prices and capacity levels, Air Canada would spend an average of $230 in fuel costs alone to carry one passenger on a round-trip journey, which is up from an average of $146 in 2007 and $110 in 2004. “The loss of jobs is painful in view of our employees’ hard work in bringing the airline back to profitability over the past four years. I regret having to take these actions but they are necessary to remain competitive going forward. Air Canada, like most global airlines, needs to adapt its business and reduce flying that has become unprofitable in the current fuel environment.”

In the U.S. itself, things are perhaps even worse. American Airlines, the world’s largest, is cutting eight per cent of its workforce, or nearly 7,000 jobs, in the fourth quarter. All the biggies – Continental, Delta, United – are doing likewise. Many passengers who booked early for fall and winter vacations are finding that their flights no longer exist. Some smaller airports may find they no longer have scheduled service. Even popular destinations are facing severe reductions in service; seat capacity at Honolulu in October will be down 23.7 per cent from last October’s figure. Secondary airports in large metropolitan areas are suffering; Oakland airport in the Bay area dominated by SFO will see a reduction of 21.8 per cent. Sacramento is losing more than its one daily Air Canada flight from Vancouver; its capacity reduction in October will be 10.5 per cent.