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RJ Paradox

Air Canada says the playing field between North American airlines is uneven. RJ Financing proves the point.


October 2, 2007
By Tim Mangue

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Air Canada’s plunge into bankruptcy protection, and the lifeline
recently tossed to the troubled American airline industry by Congress,
have reopened the old debate over the uneven playing field between
Canadian and US carriers. Air Canada’s Robert Milton led the charge
hours after it was announced that the airline was restructuring under
the Companies Creditors’ Arrangement Act (CCAA).

“There needs to be comprehension that you cannot operate in an
integrated North American market where on one side of the border there
is massive government support, and on the other side – in Canada –
there is none,” Milton told analysts and reporters.

So far, the
discussion has been confined to government subsidies with a
not-too-subtle hint by Air Canada for a bailout package similar to what
is on offer for airlines in the US. But as Canada’s only major
full-service airline begins retooling its fleet to adjust to a new
business model, expect the debate to strike at the heart of aircraft
manufacturing in Canada.

The issue is regional jets. Like
United Airlines, its Star Alliance partner in bankruptcy protection,
Air Canada wants to put greater emphasis on frequency and
point-to-point service. This means more aircraft with fewer seats on
transborder routes. (Some analysts argue that frequency is the only
real service tool a scheduled carrier has to distinguish itself.) “From
a strategic standpoint, a key fleet component will be significant
growth of both the 50-seat regional fleet and (entry) into the 90-seat
segment,”Milton said.

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Certainly, Bombardier has the platform.
Air Canada’s fleet already includes 24 of the 50-seat CRJ100s, and the
manufacturer’s business case for the airline to operate the larger
86-90 seat CRJ900 is reported to cover a sizeable boardroom table. Even
so, there is no guarantee that when the time comes, Air Canada will
automatically go shopping in its own backyard.


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