Air Canada ready for WestJet’s low-cost carrier plans
TORONTO Air Canada said on Friday that it plans on taking a “wait and see” approach when it comes to ultra low cost carriers (ULCCs), but is well positioned to respond to WestJet's plans to roll out the alternative service.
Benjamin Smith, Air Canada's president of passenger airlines, told analysts on a conference call Friday morning that the Montrealbased airline has many tools at its disposal to compete in the domestic market, particularly through the use of Air Canada Rouge, its lower-cost leisure carrier.
“We are very well positioned to react to whatever takes place in the marketplace, unlike where we were 10 or 15 years ago,” he said.
Earlier this week, WestJet announced that it will purchase up to 20 Boeing 787-9 Dreamliners as it sets its sights on expanding its international reach in Europe, Asia and Latin America. The move is part of a larger strategy that will see the Calgary-based company look for growth in both the longerhaul and ultra-low-cost segments.
When it comes to the launch of an ultra-low-cost carrier, Air Canada president and chief executive Calin Rovinescu said the company will “wait and see how it plays out.”
“We have no restrictions on deploying Rouge domestically if that's what we decide to do, so we'll look to see how the marketplace evolves,” he said on Friday's conference call with analysts.
The federal government announced in November it would provide aspiring aircraft carriers from existing foreign ownership limits and pursue legislation to permanently raise the limit to 49 per cent for all Canadian carriers.
But there are still many obstacles in the market, said Rovinescu.
“Canada has its own unique dynamics, which also involve the infrastructure costs that we have in this country which we've been fighting for a long time to reduce,” he said. “I think it's one of the reasons why we haven't seen more ULCCs come into the market earlier, and we haven't seen transborder traffic by some of the U.S. ULCCs.”
Smith said Air Canada has been testing Rouge on “a very selective basis” over the last year or more on various routes, including Toronto to Abbotsford, Toronto to Victoria, and Toronto to several locations in the Maritimes, to see whether it would cannibalize yields on the airline's main routes.
Smith said while Air Canada is pleased with the service, there are no expectations of increasing it at this time. “But we do have it ready and we have no restrictions if we would like to go down that path,” he said.
The company has the option of removing premium seats from Rouge planes and other aircraft and installing regular seats, which would match the 189-seat capacity on WestJet's proposed ULCC flights.