Istanbul Ataturk Airport

Air Canada aims to sustain profitability momentum through a focus on international service

Air Canada returned to profitability for the full year 2012 despite bruising labour unrest and intensifying competitive pressure from its main domestic rival WestJet.

To combat the increasing threat from WestJet, Air Canada is leveraging its international network in the hopes that strategic moves it is making to improve existing service and introduce new markets will allow it to sustain its recently-achieved fragile profitability.

The carrier’s 2012 adjusted net income of CAD53 million (USD53 million) reversed a loss of CAD122 million (USD122 million) for the year-prior. Its full year 2012 profit is all the more noteworthy given its net losses for 1H2012 grew by CAD241 million (USD241 million) to CAD306 million (USD307 million).

While Air Canada turned a CAD107 million (USD 107 million) profit in 2010, it sustained losses of CAD24 million (USD24 million) in 2009. During 2008 Air Canada bled CAD1 billion (USD1 billion), which was followed by concessionary agreements reached with labour groups in 2009 to avoid a second stint in creditor protection after its emergence in 2004.

Air Canada seizes on Asian strength while laying the groundwork for key connections in Istanbul

Air Canada is banking on continued strength in its Pacific network into 2013 as it aims to expand its reach into Asia during the summer high season next year through new service to Seoul from its Toronto hub and an expansion of offerings to Beijing and Tokyo Narita. At the same time the carrier is introducing flights between Toronto and Istanbul, Turkey as a means to tap the strength of fellow Star Alliance member Turkish Airlines’ network across central Asia, Africa and the Middle East.

The new flights to Istanbul could be Air Canada’s answer to the growing partnerships that airlines participating in other large global alliances are forging with Gulf carriers, something Air Canada and its major Star partner Lufthansa have so far refused to explore as both carriers have been the most critical of the rapid expansion of Middle Eastern airlines during the last few years.

The moves by Air Canada into Asia during 2H2013 follow the carrier’s strong performance in its existing markets in the region throughout 2012. Presently, Air Canada serves five destinations in the Asia Pacific region – Beijing (from Toronto and Vancouver), Shanghai (from Toronto and Vancouver), Hong Kong (from Toronto and Vancouver), Tokyo Narita (from Vancouver and Toronto) and Seoul (from Vancouver). Asia currently accounts for 10% of Air Canada’s international seats on offer and 26% of its international ASKs.

Turkish Airlines plans further North American expansion with Houston and potentially Miami

Turkish Airlines is planning further expansion of its North American network, currently five destinations, with the recent announcement of plans to serve Houston from Apr-2013. The airline has also indicated it will commence services to Miami, Boston, Detroit and Atlanta as part of its near- to medium-term network expansion plan with Miami also likely to be launched in 2013.

The launch of new US routes comes after Turkish has used 2012 to take a break in opening more trans-Atlantic routes and instead focus on increasing frequencies to its existing North American destinations.

With its eyes set on LOT and TAP, Turkish Airlines aims to become Europe’s most European airline

Turkish Airlines has steadily expanded its network in Europe over the past decade but now it intends to take its expansionistic conduct a step further with acquisitions in some of the continent’s medium-sized airlines. It is in negotiations with LOT Polish Airlines to purchase a shareholding and it has shown preliminary interest to participate in the planned privatisation of TAP Portugal. Turkish has already one of largest networks in Europe and its new strategy to complement its strong organic expansion with mergers and acquisitions spells more bad news for Europe’s legacy airlines that have not been able to match Turkish Airlines’ high growth in recent years. Turkish Airlines has openly stated it aims to be the world's largest carrier.

The Istanbul Ataturk-based airline has consistently outpaced the traffic growth of its European full service counterparts since 2003 and has posted growth rates well above the average of the Association of European Airlines (AEA) members.