Air Canada

US carriers gain access to their strongholds through new Washington National slot allocation

Four US carriers have won rights to launch flights from slot-controlled Washington Reagan National Airport to serve markets where they are dominant or have a strong presence. Southwest Airlines and Virgin America are gaining access to National for the first time, while JetBlue will expand its blossoming presence at the airport. The new services should usher in some fare rationalisation in those markets as the carriers seek to challenge United’s dominance in the Washington market from its hub at Dulles International Airport, which is about 56km from National.

US lawmakers in the latest FAA Reauthorisation bill signed into law earlier this year included a provision freeing up four outside perimeter (beyond 2,011km) slot pairs for new entrant or limited incumbent carriers at National, which is located only about 6km from the US capitol. Carriers already having an ability to operate flights outside the perimeter were also allowed to trade in a single pair of inside perimeter slots for new outside perimeter service. A slot pair consists of one take-off and one landing slot.

Air Canada vows bankruptcy is not an option as its losses continue to mount

Air Canada is vowing another bankruptcy is not an option as it continues to battle an unprofitability streak and continued fallout from its ongoing labour strife and the closure of its main maintenance provider Aveos. Patience appears to be wearing thin as four years of losses continue to plague investors looking for an elusive return on investment. The airline is opting not to give any clear-cut timing for a return to profitability as it first needs to achieve new collective bargaining agreements with two remaining labour groups – pilots and mechanics – that have staged work stoppages that in the short term have further diluted its brand.

Despite paying down CAD260 million (USD259.2 million) in debt during 1Q and achieving a more than CAD500 million (USD498.5 million) improvement in a cost reduction scheme, Air Canada overall remains unprofitable. Its CAD3.1 billion (USD3 billion) in expense outpaced the CAD3 billion (USD3 billion) recorded in revenues, which drove a 27% increase in its operating loss year-over-year to CAD93 million (USD92.7 million).

Steady demand fuels strong revenue performance for Canadian carriers in first quarter

Favourable demand trends helped Canada’s two main carriers record strong unit revenue performance year-over-year during 1Q2012. But the similarities end there as WestJet recorded a profit of CAD68.3 million (USD68.6 million) while Air Canada widened its loss from CAD19 million (USD19.1 million) to CAD210 million (USD210 million) year-over-year as its fuel expense grew by CAD147 million (USD147.7 million). Both carriers face challenges heading into the rest of year as WestJet has revised its cost guidance upwards and Air Canada continues to manage the fallout from its prolonged labour strife.

WestJet’s 6% growth in passenger unit revenues beat the carrier’s own forecast as CEO Gregg Saretsky explained the revenue growth allowed WestJet to fully recover the 19.6% rise in fuel costs the airline recorded year-over-year.

Total revenue at WestJet increased 15.3% during 1Q to CAD891 million (USD895.2 million) as yields increased 4.8% on a 8.8% rise in supply.

Union support of US Airways' quest to take over American is a first step in a long merger process

Public support by American’s unions of a merger with US Airways is an unprecedented move, and reflects the years-long frustration that has built among American’s employees towards previous and current management. The employees see an opportunity to start fresh, and work with a management team that will cease blaming labour for the carrier’s plight. US Airways sees an opportunity to completely overhaul American’s lacklustre revenue management that has consistently produced results that pale in comparison to its peers. But many questions remained unanswered over the perceived strength of a combined network, and many tasks have to be completed before a merger gets remotely close to reality.

US Airways formally declared it was examining its options regarding American earlier this year, and tactically began courting the carrier’s unions to gain support for a merger of the two companies that would entail US Airways’ management taking charge of the new American. Unlike US Airways' attempt to take over Delta Air Lines in 2006 when it was restructuring under Chapter 11 and Delta employees rallied to block the deal, American’s employees are exhausted with methods management has adopted in negotiating new collective bargaining agreements during the last few years.

Porter quietly reaches profitability in fast-changing Canadian market

Small Canadian carrier Porter Airlines during 2011 celebrated its fifth anniversary by recording its first annual profits as rival Air Canada spent most of the year embroiled in contentious labour negotiations with employees that have escalated into employees participating in work slow-downs during the last couple of months. In contrast, so far during 2012 Porter has enjoyed steady increases in its traffic as it continues expansion of its route network. But the carrier could start to see pressure next year in some of its markets as WestJet prepares to launch a regional subsidiary operating the same size aircraft as Porter, which could create challenges for the carrier in sustaining its new-found profitability.

Porter CEO Robert Duluce recently told The Ottawa Business Journal that Porter enjoyed its first profitable year in 2011 and expects to remain profitable this year. Porter reached its profitability milestone while some if its key business markets came under intense pressure.

Yanking of Jazz Thomas Cook contract underscores ever-growing difficulty in regional airlines

A decision by travel package operator Thomas Cook to end a five-year charter agreement three years early with Canada’s Jazz Aviation reflects the stark realities regional carriers face in attempting to meaningfully diversify their core business of providing feed to network legacy airlines.

While Thomas Cook ended the deal due to souring demand, it leaves Jazz again with just one client, Air Canada. Tensions between Jazz and Air Canada have flared over a dispute on rates paid to Jazz that could result in the regional carrier having to pay its partner CAD26 million (USD26.2 million) if an arbitrator later this year rules in Air Canada’s favour.