Air Canada aims to serve seven major Canadian cities with its Boeing 787s, the first of which are projected to arrive in 1Q2014. According to reports in The Globe and Mail/Business First, the carrier plans to launch 787 services from Toronto, Vancouver and Montreal in 2014 and hopes to add Calgary, Edmonton, Ottawa and Halifax by late 2014 or early 2015. Air Canada is also reportedly considering cities in India and China as prospective destinations. Air Canada has 37 787-8s on order.
Air Canada aims to serve seven Canadian cities with 787; possibly India and China too
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Canada’s government paves the way for ULCCs Enerjet and Jetlines to jump into the marketplace
Two of Canada’s aspiring ultra-low cost airlines made a major breakthrough in Nov-2016 after they were granted exemptions from foreign ownerships restrictions, which allow foreign entities to hold up to 49% of Enerjet and Jetlines. Now Enerjet has taken on some heft by partnering with the global ultra-low cost airline investor Indigo Partners, which was instrumental in Spirit Airlines’ ULCC transition and now owns the ULCC Frontier Airlines. Another new Canadian ULCC, NewLeaf Travel, boasts former Spirit Airlines CEO as chairman of the board.
It is tough to predict how those influential backers will affect the outcome of efforts by the new crop of ULCCs to successfully execute the model in Canada. Although Canada is one of the few mature aviation markets without a true ultra-low cost competitor, the nuances of the Canadian domestic market could create challenges for the long-term viability of NewLeaf, Enerjet and Jetlines in the marketplace.
Jetlines and Enerjet, operating as FlyToo, aim to debut in Canada’s market during 2017. Unsurprisingly the country’s two airlines Air Canada and WestJet plan to compete vigorously with the start-ups, with WestJet vowing to defend its franchise and match the fares of its new competitors.
Air Canada continues its strategy of higher capacity growth to fuel rapid international growth
Air Canada’s yield and passenger unit revenues during 3Q2016 remained broadly in line with those of the previous quarter, which is a different outcome from the results posted by many of its North American peers. However its top line revenues grew nearly 11%, and its costs fell at a lower rate than those of many other North American airlines.
The airline’s yields and passenger unit revenues began falling earlier than those of most other airlines based in North America, and Air Canada’s recurring explanation is that lower yields and unit revenues are an expected byproduct of changes in its business model – the creation of its low cost unit rouge, a higher mix of lower-yielding leisure travellers, and longer average stage lengths. As yields and unit revenues continue to decline, Air Canada continues to deliver on its own established financial goals for EBITDAR, ROIC and leverage ratios.
Air Canada’s focus has been on international expansion during the past few years, and that trend will continue for the foreseeable future. In 2017 the airline is expecting nine Boeing 787s scheduled for delivery and its capacity is likely to mirror 2016’s double-digit growth – given that the company will accept delivery of nine new widebodies this year. The bulk of its growth will again be directed to international routes as several new long haul markets are scheduled to come online in 2017.