Air Canada Presentations

Transcript

Ferio Pugliese:Thank you, Lucy, and good morning. I'm going to pick up a little bit on the strategy here from where Lucy left off, and then turn things over to Catherine to give us a bit of insight on our strategy and vision on the technology side. Before I do, I do want to thank Peter and CAPA for their invitation and including us as part of the deliberations over the next 2 days. It's always good to see members of the aviation community from far and wide in one space, and getting the opportunity to share our passion we have for this wonderful industry. And thanks to Barry and Pascal for your hospitality. Always a pleasure to be here in Winnipeg, especially in the summer months. Just a few things. I mean, starting off here, as Lucy outlined, I mean, You know, in addition to the financial hub that we have here in Winnipeg, we do have a considerable footprint, and we have, you know, obviously passengers that are flying in and out of the community here on Air Canada mainline and Rouge, and, you know, both have given us the opportunity to really meet every aspect of our customer mix, and in particular, Rouge has allowed us to branch out into obviously the leisure space, and meet a customer segment that we believe was underserved and allowed us to compete in. The space that I play in particular is Air Canada Express, and I thought I'd maybe just indulge you a bit with who Express is. It's the regional carrier for Air Canada. I'm very passionate about regional airlines only because I grew up and came from a very small community and understand the power and the need of connecting regional spaces and regional communities into networks, allowing people to connect across a broad geography, if not globally. The unique thing about Canada is we're a small population across a big geography. Regional connectivity is critical. We do that a few ways at Air Canada. Express is the, obviously, the brand banner, but it is not accomplished without the undivided commitment from our partners, and we have a number of partners that we work with. Our largest partner is Air Canada Jazz, which represents about 66% of all of the capacity, followed by Sky Regional, Air Georgian, who's in the room today, Eric is with us today, and a smaller carrier out east through EVIS. We enjoy a great partnership with these carriers through CPAs, but it crosses a wide range of aircraft types. So we serve seats from 18 seats all the way up to 78 seats, with a broad network of about 153 aircraft. And to just put a finer point on it in terms of overall total cycles, when you look at what Air Canada Express does in the space that we operate in, we serve about 300,000 customers weekly, which takes us to roughly about 15 million passengers that we will move through our network over the course of an entire year. The point and focus of Express, though, is to really build on connectivity. You know, there's a large portion of our traffic is transborder, in addition to our regional traffic through and about Canada, but the objective of Rouge accounting for— sorry, of Express accounting for 1/3 of all the cycles of all of Air Canada, is to feed our network hubs. Certainly, although Winnipeg is not considered a major hub, it is a hub in the sense that we do have a lot of regional traffic that flies through here and connects beyond. Toronto, Vancouver are also considerable hubs that we continue to focus off, and obviously Montreal. You know, if you look with respect to our growth over the course of the last several years, we've seen our traffic grow by about 142%. year over year. And most recently, and what you can expect from Express, is we've recently signed an expanded CPA agreement with Jazz. Takes us to 2035, an additional 17 years, which in fact sees us shrinking the fleet from 116 aircraft to 80 aircraft, but increasing capacity. So we'll be fixing that CPA partner to 76-seat aircraft, But what it does, in complements to what Lucy has just explained, is it allows us now to flex the Air Canada mainline and Rouge network more substantially. With the introduction of the A220s, with the introduction of Rouge flying, and additional, when the MAX is up and running, it allows us to flex the mainline fleet and use that to complement Air Canada Express. And then I would be remiss if I didn't point to, you know, the Wall Street Journal Comment here. It says why savvy U.S. flyers take Air Canada. Obviously, as a byproduct of a good bilateral arrangement between Canada and the U.S. with open skies back through the '90s, and that being further complemented in 2005 with with open skies agreement that extended to cargo. What it's allowed us to do is it's allowed us to actually connect passengers beyond just the borders of the United States and Canada, and in fact using Canada as a hub to connect internationally and globally through Asia, Europe, and South America. And then finally, the last piece, just because I see I'm running short on time, I'd be remiss if, as I speak to, you know, regulatory policies and what we've seen with respect to passenger rights, we are facing tremendous headwinds in Canada today on the regulatory regulatory front, and I think it's very important as an industry that we pay very, very close attention to the headwinds that we are facing today within Canadian aviation regulation. We still remain one of the most expensive jurisdictions to fly globally. Much of that has to do with the cost of air travel associated with rates, taxes, and fees associated with air travel. Today, We're seeing now a layering of excessive regulation, regulations like the Passenger Bill of Rights, carbon tax rules, flight duty time, labour code amendments, all regulations that is set to meet the right intentions, but in fact there are many cases where airlines have actually been employing these as their general policies in the way they operate. We've seen in other jurisdictions where some of these policies And these regulations have been— led to the industries being very uncompetitive. I think it's important for us in this space is that we ensure that when we embark on employing new regulation or implementing regulation, that it's done in a very thoughtful, calculated, and thorough fashion to ensure that it is not hindering or destroying demand for air travel. And hence, if you look at the statistics, and I look in the room, I see Massimo here from NAC, There's a wonderful piece of work that was done earlier this year that shows over the last 10 years you can actually see air travel and airfares have actually declined net-net incrementally on a fare basis in Canada due to competition and due to the change in technology and due to companies reinventing themselves, yet rate taxes and fees have increased almost at the same exponential rate incrementally over the last 10 years. So there is an opportunity for us to pay very close attention to that and be more influential in the manner in which we're seeing and shaping that policy. So done right, I think it creates a level playing field, but it's important that it's done in a thoughtful fashion. So I'm going to pause there. I'm going to turn the floor over to Catherine because I know we want to get into a debate here over the course of this panel, and let Catherine lead us into a discussion on technology. Thank you, Ferio.

Catherine Dyer:Bonjour, bon matin. I get to talk about technology. So Lucy set the stage that we are an 82-year-old startup, and that's a pretty cool place to be when you're running a technology function for, for an airline. So my name is Catherine Dyer. I'm the Senior Vice President and Chief Information Officer at Air Canada. And a couple things I want to cover off with you today are 2 big themes going on in the tech space. One is the risk side of it. So a little bit, I want to talk about cyber and just some thoughts from a Canadian context and an Air Canada context around that. And I also want to talk about technology and how we're using this to develop our business. I've been here for about 2 years now, and I joined a team that's had technology in its DNA for a very long time. From the first computerized reservation system and involvement in the early versions of the black box, to the first kiosk for check-in and electronic boarding passes, Air Canada has had a proud history of innovation. Today, we're building on that legacy. Over the past decade, and you've heard Lucy talk a little bit about it today, we've been transforming Air Canada with the focus on our financials, our product, our network. During these years, the IT area was focused on safely and securely and reliably running the airline's technology. I joined Air Canada at a time when we were ready to begin a technological transformation, one that enables better experiences and drives revenue growth and cost efficiencies. This is all underway in a landscape where a number of digital technologies are redefining the way that all of us do business and will have an impact right across our industry. I wanted to speak to a few of those. Artificial intelligence serves as the engine for travel personalization and identifies business-critical operational improvements. It's a mobile-first world. Consumers expect and demand the ability to be on the move and have an elegant interaction as they move throughout their life, including their travel journey. For employees, mobile puts tools in their hands to deliver an operational performance experience as well as highly personalized customer service. Our ability to use cloud, microservices, the Internet of Things to collect, connect, and move data efficiently is game-changing and establishes the platform to use data to improve the experience of our customers. Switching gears, safety first, always in a cyber world. There's an ever-changing technology landscape which requires companies to prepare for evolving cyber threats. There's an increased velocity and sophistication of attacks, and one needs only look to the news to see the impact that cybersecurity is having on all industries. At Air Canada, our safety first always is our core value, and that translates into our approach for cybersecurity. We are looking at this environment based on managing risk and investment across 5 key areas that you'll see on the slide there. As part of our comprehensive cybersecurity program, we continue to invest in detection and blocking technologies, taking advantages of advanced practices and in proactive threat hunting. And we additionally undertake extensive testing, including our ability to respond to incidents, and continue our investment in comprehensive cyber awareness with our team. Humans are one of the most difficult parts of managing this risk, uh, for all companies. We continue to work with our vendors as well as government agencies and industry partnerships to address these risks. And we collaborate very, very closely across the airline industry. When it comes to cybersecurity, it's got to be a team sport. We're going to benefit from sharing industry intelligence as a best practice. In my opinion, there is significant room for leadership by government to collaborate with industry. This is not just a Canadian— or not just a company problem. This is a Canadian economic problem. We're largely focused on foundations and modernization in our technology stack right now at Air Canada. We are, as Lucy talked about, in the final stages of putting in a new reservation system. That's the equivalent of a heart transplant for an airline. We're working on the foundations of our loyalty. But while we're doing that, we're doing some pretty cool stuff in the data, digital, and AI area. Data is the new oil. Capturing and leveraging data is critical to our customer-centric digital strategy in both operations and in loyalty. In this area, we are flying the flag and working with government and industry to help Canada emerge as a global leader in AI. And I was really excited this morning as I was chatting with some of the local folks in Winnipeg to hear what a big part of that is in, in the Winnipeg economy. We've, within Air Canada, created a center of excellence for AI, and we've delivered 2 early start programs in our cargo business and in our revenue management. We've also identified no less than 30 opportunities for AI and machine learning at Air Canada. We are working closely with partners, as noted up on the slide, to deliver practical, explainable AI. It's not in replacement of leadership, it's in augmentation of leadership. Balancing this with how we protect and inform our customers on our data approach is top of mind for Air Canada, and we are actively participating in the development via the Business Council of Canada on a white paper that outlines the issues and potential solutions related to data-driven economy, and it's been a very, very interesting piece of work. So quickly in summary, so we can get to the Q&A here, I want to leave you with a couple thoughts. Technology innovation's in our DNA, and we're moving to secure our spot as a technology innovator through smart investment and focused execution. We are very focused on cybersecurity. And finally, as we're setting the foundation for the next generation of the airline, we're looking to differentiate ourselves within the industry through technology and embracing ways of doing business differently. Really excited over the next couple of days to have some discussions around this. And with that, I think I'll pass it to— I'll get back over to the couch and we can talk about questions. Thank you. Thank you, Catherine.

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