Canada’s incumbent airlines fortify their strategies for a post-pandemic market
Canada's start-up low cost airlines have garnered a lot of attention during the last few years, but the country's longer-standing airlines - Air Canada, WestJet, and 17-year old Porter Airlines - are devising their own strategies to remain competitive in a post-pandemic operating environment.
Air Canada and WestJet are leaning into partnerships to bolster their networks, and WestJet has zeroed in on building on its fortress in Western Canada.
Porter Airlines, meanwhile, has embarked on expansion plans with its new fleet of Embraer 195-E2 jets.
As the different approaches taken by those airlines unfold, the success or failure of their strategies will be heavily scrutinised.
Summary
- Canada's longer-standing airlines - Air Canada, WestJet, and Porter Airlines - are devising strategies to remain competitive in a post-pandemic operating environment.
- WestJet plays to its strength in Canada's western region and leverages new partnerships.
- Porter Airlines starts a new chapter with the launch of its Embraer E195-E2s.
- Air Canada's scale remains one of its best competitive weapons.
ULCCs are emerging, but established airlines still dominate Canadian market
Although the ultra-low cost carriers Flair, Swoop and Lynx have emerged to create a new era for budget airlines in Canada, the country's incumbent airlines are not resting on their laurels as the competitive dynamics change.
And despite the rapid growth of those low cost start-ups, Air Canada, WestJet and Porter Airlines remain Canada's largest carriers measured by departing frequencies.
Canada: departing frequencies by airline, as of early Feb-2023
WestJet doubles down in the West and forges new partnerships
During the past year WestJet has focused on its historical strength in Canada's western region, moving its Boeing 787 to its base in Calgary. It has also capped its widebody fleet at seven Boeing 787s.
In late 2022 CAPA's sister publication 'Routes' reported that WestJet was cutting unprofitable flying in Eastern Canada and doubling down in Calgary, Edmonton and Vancouver.
Reflecting that shift, WestJet has suspended long haul flights from Halifax, Toronto Pearson International airport and Vancouver.
For the summer period in the Northern Hemisphere WestJet will serve numerous intercontinental routes from Calgary - Tokyo Narita, Barcelona, Edinburgh, London Heathrow and Gatwick, Paris, Rome and Dublin.
The airline relaunched flights to Amsterdam from Calgary in late 2022.
WestJet has also forged new partnerships with Japan Airlines, placing its code on the Japanese airline's Tokyo Narita-Vancouver route.
It has also entered into a new tie-up with Korean Air to put the WestJet code on Korean Air's service between Seoul and Toronto.
The airline will deploy its assets where it is the strongest in Canada, while creating new partnerships as a low-risk endeavour to maintain a certain level of network depth.
Porter branches out with E-Jets and a push from several airports
Porter has begun its long-awaited expansion with its new Embraer E-195-E2s.
The CAPA Fleet Database shows that the company has five of the jets in service and 44 remaining on order.
Porter Airlines: fleet summary, as of early Feb-2023
The airline recently inaugurated its first routes with the E-Jets from Toronto Pearson International to Montreal and Ottawa. There will be also new Porter services from Toronto Pearson to Edmonton, Calgary and Halifax in Feb-2023.
Porter has declared that it aims to build a presence in key eastern cities - Toronto, Ottawa, Montreal and Halifax - to foster connections across Canada and to the US, Mexico and the Caribbean.
The company recently told the US Department of Transportation (DoT) that it was aiming to introduce transborder service with the new aircraft to Los Angeles and Las Vegas in late spring or early summer 2023, depending on the timing of obtaining necessary regulatory approvals.
Other US destinations Porter plans to add during the northern summer of 2023 include Orlando, Fort Lauderdale and San Francisco.
It's possible that WestJet's calculation for de-emphasising was driven in part by Porter's plans to bolster its presence in Eastern Canada. Porter already has brand awareness in the region, through its operations from its base at Billy Bishop Toronto City airport, which has been the airline's home since its launch nearly 17 years ago.
Given the fact that some of WestJet's markets in Eastern Canada were underperforming, coupled with the new capacity entering the market, that likely led WestJet to re-evaluate its position in the region.
Air Canada leverages its scale as competitive dynamics shift
Canada's largest airline, Air Canada, is also working on numerous fronts to remain competitive.
The airline has forged what could be characterised as a landmark agreement with Emirates Airline to broaden its reach into Africa and the Middle East.
Additionally, it is strengthening its transborder alliance with United Airlines, which will bolster its sixth freedom traffic.
During 3Q2022 Air Canada's trans Atlantic revenues grew 10% compared with the same period in 2019, on 9% less capacity.
"All of our Atlantic routes met or exceeded our expectations", Air Canada chief commercial officer Lucie Guillemette has said.
Given demand trends, Air Canada is setting itself up for another strong high season across the Atlantic - perhaps more so now that WestJet has opted to centralise its long haul flights in Calgary.
With a still sizeable share of Canada's system departing frequencies (see chart above), Air Canada is poised to leverage its position to capitalise on robust demand, particularly with more countries in Asia opening up.
Even as it works to leverage its size and scale, Air Canada remains in a rebuilding mode.
Its departing frequencies remain below pre-pandemic levels, as its rebuild continues.
Similarly to some of its larger US global network peers, the airline is likely taking a cautious approach in rebuilding its schedule, given supply chain constraints, the threat of operational disruptions, and some macroeconomic uncertainty.
Air Canada: weekly departing frequencies, from 2019 to early 2023
All of Canada's airlines have robust levels of ambition post-COVID
As Canada's start-up airlines see numerous opportunities as the country's air travel market continues to recover, incumbent airlines are devising their own strategies to navigate changes in the Canadian marketplace, and in the global air travel sector.
It remains to be revealed what the industry outcome will be, if those operators are to be successful in their efforts.
But for now, ambitions continue to remain high among Canada's airlines.