Air Canada expands low-cost Rouge flights

Some U.S. routes to be serviced from the west

Air Canada is trying to further cut costs by expanding its low-cost subsidiary Rouge in Western Canada and using it to replace its regular service on some U.S. routes from Vancouver and Calgary.

Air Canada said Tuesday that Rouge will begin daily flights at the end of April to Las Vegas from Cal- gary and Vancouver.

That will be followed with service to Los Angeles, San Francisco and Anchorage, Alaska, a key port for cruise ships. Seasonal service from Vancouver and Calgary to Phoenix will begin next December.

Air Canada chief commercial officer Ben Smith said the expansion of Rouge and the addition of new aircraft are a “key element of our strategy for sustainable, profitable growth at both airlines.”

“Air Canada Rouge is best suited to compete more cost effectively in these markets where there is both a high leisure travel demand and low-cost competition,” he stated in a news release.

The airline is using Rouge to lower costs by filling planes with more passengers and paying workers less than on the main network.

Smith said it may add other destinations to Rouge as Air Canada receives delivery of new airplanes, allowing its existing Airbus A319s and Boeing 767s to be transferred to the low-cost subsidiary.

Air Canada also said Rouge will take over service between Toronto and San Diego and Phoenix.

The Montreal-based airline is expecting to cut $100 million in costs — a 15 per cent reduction in costs per available seat mile — over five years by adding new Boeing 777s and 787 Dreamliners, and expanding Rouge.

With 18 per cent more seats, lower wages, more flexible work rules and lower overhead, Rouge’s narrowbody fleet is expected to operate 21 per cent cheaper than the same airplanes on the main network. The advantage gained with the wide-body 767s is even larger, with a 25 per cent increase in seating to 264 passengers that lowers costs per available seat mile by 29 per cent.

Analyst David Tyerman of Canaccord Genuity said the expansion of Rouge in Western Canada is consistent with Air Canada’s previously announced plans and efforts in Eastern Canada.

By increasing capacity through the addition of more seats, he said the switch of routes to Rouge makes the airline more competitive.

“They’re not targeting other airlines or other vendors, they’re after the leisure market, which WestJet happens to play in, as does Transat and everyone else,” he said.

Tyerman said Rouge could eventually provide service to leisure destinations in Europe or Asia if demand warrants.

Launched last July, Rouge plans to operate 54 routes, including service to Europe from Montreal and Toronto.