Recorded at CAPA Low Cost Long Haul Global Summit, 4-5 Oct 2018

Air Canada Rouge CEO Update – Low Cost Long Haul Is A “Tough Business… But We Are Comfortable With Our Business Model”

Duncan Bureau, president, Air Canada Rouge, highlights how Air Canada Rouge works to complement the premium operations of Air Canada and how it offers the mainline business a brand to better compete with LCCs and ULCCs.


Duncan BureauWell you know, Air Canada Rouge is a creative to the overall Air Canada network. Since starting Rouge five years ago, we've added 40 new destinations, so that's created a lot of opportunity for our employees. We've added 2,000 great jobs just in Air Canada, Air Canada Rouge alone and when you look at the impact it's had on the industry, we've added thousands of jobs across the entire tourism industry. Air Canada Rouge operates into markets where Air Canada mainline may not make sense and we're talking about Air Canada as a primary premier carrier, four star, the only four star carrier in North America.

The Air Canada Rouge product is a great product for us to compete with high density LCCs and ULCCs that are operating into key markets. Florida is a perfect example. We lost a lot of market share operating mainline. Once we introduced the Air Canada Rouge product we increased the number of cities that we fly to and our overall market share has grown significantly and now we're certainly the lion's share of the market into Florida. That's kind of how we fit in.

Well you know, we needed to get our financial house in order at Air Canada and Kaylen and Mike Russo and the executive team did a phenomenal job. One of the things that we knew we had to address was our competitiveness against the LCC high density operator. This Rouge product allows us to do that. The economic benefit of having Rouge operate vs mainline is significant. We can deploy those mainline products, the mainline flights, into markets where mainline can make money and contribute positively to our overall [inaudible], whereas Rouge can operate and compete very, very effectively with the low cost carriers. Right product, right place, right time and certainly Rouge is one of those things that helped Air Canada recover financially and we're very proud of that.

There absolutely is and what we look at is the market, the type of yield that we're getting at a particular market, who the operators are in those markets, whether Air Canada mainline is the right product to deploy against that competitive set or whether Air Canada Rouge is. What we're finding is there are more and more opportunities for Air Canada Rouge to be the operator of choice. Again, we learned some lessons, we deployed Rouge into LA and we found that the market didn't accept that. They wanted mainline and it was the right type of yield to continue to operate mainline, so we put mainline back into LA in some markets.

You know what? It's one of those products that you're going to learn. The great news about airplanes is you can move them, so if we deploy Rouge and it's the wrong product and we can replace it with mainline and it's the right product, it's the benefit of being an airline.

Well, first of all it's a great airplane and we're really excited to be onboarding that airplane in 2019. The A220 has great range, great economics, it's a game changer in the regional market and as you know, it's going to replace the Embraer fleet, which is leaving the Air Canada mainline fleet. You know, whether or not we eventually end up with those airplanes in Rouge, who knows, but right now that is an aircraft that is being planned for mainline. It will operate in regional routes and it has great range and capability. We're really looking forward to having that airplane in our fleet.

Well you know, it's a tough business, particularly in the long haul. You're dealing with low yields because of stage length. The reality is fuel is not helping. A lot of these low cost carriers who are trying to start long haul operations, Primera is an example that went out of business this week. We get the benefit of mainline and we get the benefit of a very extensive network, we get the benefit of a parent company that allows us to acquire aircraft, utilize services that other carriers who are in a startup mode wouldn't have that capability.

You know, long haul, low cost, we've been at it for five years and I would argue we're the first successful long haul, low cost carrier in the world and it's a very tough business to be in. We launched with 767s in the Air Bus fleet and we're doing extremely well. You know what? We'll see what happens, but we're very comfortable with our business model. We're a creative to Air Canada's overall profit margin and we hope to continue that.

One of the other great things about Air Canada Rouge that's really unique is how we onboard our cabin crew. Our in flight team are phenomenal, extremely experienced. One of the things that we did that's very different from other carriers is we send all of our new cabin crew to Disney University, really to focus on customer service. You know, at the end of the day we're a customer service company who just happen to operate airlines or aircraft. That really has allowed us to have a competitive advantage in the marketplace. We have great onboard crew and that customer service, customer-centric training that they get at Disney is something that we think will help us in the long run.

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