International jet set target of new Air Canada lounge

Signature Suite part of airline’s efforts to lure clients to premium products

While some airlines race to launch a Canadian ultra-low-cost carrier, Air Canada has set its sights on catering to its biggest spenders and luring more international business and U.S. travellers to fly through Toronto.

Air Canada has ramped up its effort to attract premium-fare-paying passengers with the launch of a swank Signature Suite at Toronto Pearson International Airport.

This is its fourth lounge at the airport, but the first and only one exclusively catering to international business travellers, offering a full-service restaurant, signature cocktails and an escape from the usual busy crowds at the airport.

Air Canada’s president of passenger airlines Benjamin Smith said the lounge — which took 12 months to design and will officially open on Friday — is one of many steps the company is taking to attract more premium customers.

“We’ve invested money at our main hubs — in Toronto, Montreal and Vancouver — where passengers can have an exclusive experience from curb all the way to the lounge. This will elevate us to a position that no other North American airline can aspire to,” Smith said in an interview from the lounge last week.

“We’re enticing more customers to fly on our premium products, and we are investing more money because the return on investment is showing that’s definitely worth it.”

Air Canada has spent the past several years trying to attract premium passengers.

Smith says investments in new Boeing 787 jets, five of which will be introduced into the fleet next year, as well as the introduction of premium economy seating, Wi-Fi installation on wide-body aircraft, and the new lounge are all part of the company’s strategy to bring more premium customers aboard.

Air Canada says the increased investment in higher-paying customers has made a direct impact on improvement of yield, the average fare per passenger per mile. In the most recent quarter, Air Canada saw a $90 million increase in revenue from business cabin, marking a 13.7 per cent increase from the same time last year. Business cabin traffic and yield growth increased by 8.3 and 5 per cent, respectively.

In addition to the premium market, Smith sees opportunity to attract passengers in the 60 U.S. cities that Air Canada serves — particularly in secondary destinations such as Philadelphia, where international travellers are often forced to connect through larger, busy airports in the United States, such as New York’s JFK or Chicago’s O’Hare.

“What we’re finding is that the biggest, most lucrative opportunity is U.S. international traffic,” Smith said.

But the company will be facing steep competition, both in the U.S. and within Canada.

On Tuesday, American Airlines announced it would be expanding its service to Canada, launching a new service from Chicago to Vancouver and Calgary. The company will also increase the frequency of daily flights between Toronto and Washington, Toronto and New York, Ottawa and Philadelphia, and Edmonton and Phoenix. The company also recently unveiled a redesigned lounge at Pearson.

As well, WestJet chief executive Gregg Saretsky told a Scotiabank Transportation Conference earlier this month that the airline — which launched as a low-cost carrier — wants to expand its share of the business passenger market. While the company boasts a 37 per cent share of the domestic market, Saretsky said its share of the business market is only 23 per cent.

“That represents a sizable revenue upside,” he said. In order to capitalize on that market, Saretsky said the airline is focusing operations in Vancouver, Toronto and Calgary to offer more connecting flights for passengers, and plans on building nine new WestJet-branded lounges in those three cities over the next 18 months.

Smith said Air Canada is ready for any competition.

“We believe our customers value the service that we offer and it will be pretty hard to entice them to take another carrier,” Smith said, adding that the company isn’t worried about the domestic efforts to infiltrate its business cabin dominance.

“Right now, neither WestJet or Transat has an international business class product, so there is no comparison,” Smith said.

“Our offering is extremely extensive. When you are flying premium with us in North America, it’s not hit-and-miss ... We’re very confident that we have a product and lounge offering that is pretty hard to match.”