After the failures of Song and Ted just a few years after their inception, I did not expect another North American legacy carrier to gamble with a low-cost division. Yet Air Canada announced ambitious plans today for their own discount carrier that will serve leisure destinations in Europe, Mexico, and the Caribbean.
The low-cost division will start small, with four Boeing 767s and six Airbus A319s, but expects to grow to a fleet 50 aircraft (20 767s and 30 A319s) if business remains steady.
In a letter to the Air Canada’s Pilot Association, the airline explained:
The mandate of the LCC will be limited to the market segment seeking low-cost air travel…The LCC is not intended to replace mainline routes the company considers financially viable.
Perhaps, but in the same letter Air Canada outlined plans to slash pilot pay on these routes. I get the sense that a desire to lower labor costs is a notable factor driving this new subdivision.
Let’s be clear: there is a place for "low-cost" leisure carriers. Although I highlighted the failures of Song and Ted (not to mention Zoom and Flyglobespan), Air Transat, Condor, and JetStar have done very well. It is this success that Air Canada hopes to mimic.
The new division will not feature a business class cabin–only economy and premium economy. Details about what a "premium economy" product would be like on Air Canada have not been announced. There is also no word yet whether Aeroplan or Star Alliance miles could be earned on these flights. Those questions need to be answered before this news can be fully analyzed.
More info here.
Intriguing – not only are failures of Song and Ted prominent, but there are two long-haul low-cost carriers, Zoom and Flyglobespan, that have folded in similar leisure markets that AC hopes to start. Both flew from Canada to Europe. I’m sure AC has looked into the history of those airlines, though.
Thanks for that Gray. I hope AC has looked into these failures and learned.
Miss your blog, BTW. Will be thinking about you if I make it to Transnistria this weekend.
I wonder why they didn’t have Jazz do this for them.
AC doesn’t have to look as far as Ted or Song for examples of failure; AC tried it first (and failed). Tango (http://en.wikipedia.org/wiki/Tango_Airlines) was established in 2001 (Ted and Song in 2003) to compete with then-fledgling Westjet. (The “Tango” name lives on as the identifier for AC’s cheapest fare class). Let’s hope they have learned, although my first reaction on hearing this story was that I’m glad I don’t hold AC stock…
While I think the idea is foolish in general, it may make sense for them to segregate the brand a bit. They are currently operating 3 orphan 763s (referred to not-so-affectionately on flyertalk as the 3 Amigos) to predominately-leisure destinations such as ATH, BCN and DUB (I can’t remember exactly) with an older configuration — premium economy with a sort of “domestic first” seat instead of lie-flat executive first, and no AVOD throughout. It may be easier to manage customer expectations by putting this subfleet into a different “airline”, so that passengers who have come to expect AVOD on a 1 hour domestic flight on a CR7 aren’t disappointed by a communal movie screen when flying to Europe.
I think that if air canada look at the australian model that qantas has developed jet star has small start up and now is doing very well . I know the markets in us /canada are different to the asia /pacific but the traveller on a budjet flight has to accept it a great way of getting from a to b at a cost effective manner . I travel to the us and canada from the pacific enroute to uk over the years and I think canada tourism would really take off with these travel products .