Air Canada Flying High Through Open Skies
<B> Air Canada Flying High Through Open Skies</B>
By Carolyn Green
<I>Montreal</I> - Despite the recent implementation of the final phase of Open Skies allowing U.S. carriers unfettered access to all Canadian gateways, Air Canada is optimistic it can continue to pick up a healthy chunk of transborder business.
"We're very bullish on traffic growth both in Canada and the United States," Lamar Durrett, president and chief executive of Montreal-based Air Canada, said during a recent news conference held to discuss the company's 1997 financial results.
"Ever since 1995, when Open Skies was announced, there was a feeling that once Toronto was completely open, there'd be an onslaught from the U.S. airlines. But the bottom line is that the only new services we see in the computers right now are five additional frequencies," Durrett said.
When the Open Skies agreement was signed in February 1995, it gave Canadian carriers unlimited route rights from all Canadian cities to any point in the United States. American carriers, however, initially obtained unlimited rights to fly from any point in the United States to all Canadian gateways except Montreal, Toronto and Vancouver. Last year, Montreal and Vancouver were opened, while restrictions to fly to Toronto remained in effect until February.
Since Open Skies was instituted three years ago, Air Canada's penetration into the United States has grown to 1,300 flights a week to 42 destinations, with 650 flights each week to 14 U.S. gateways.
In 1997, transborder revenues were in excess of C$1 billion (US$700 million) or more than 20 percent of total passenger sales. Overall, total passengers revenues of $3.15 billion (C$4.5 billion) increased by $387.1 million last year, with U.S. sales accounting for $205.1 million, or 53 percent of the gain. Air Canada also reported net income of $298.9 million, up from $104.3 million.
Durrett said that since Open Skies was instituted, U.S. carriers initiated 58 routes into Canada, later canceling 34, while Air Canada has eliminated only six.
Durrett attributed the Canadian carrier's success to a number of factors, including its 50-seat Canadair jet and the fact that Air Canada entered many markets before its U.S. competitors.
Rob Peterson, Air Canada's senior vice president of finance and chief financial officer, said that since about two-thirds of transborder traffic originates in Canada, "we've got the natural distribution strength, and we're flying point to point as opposed to through hubs. U.S. carriers have been successful flying into Canada but they've been successful flying from their hub cities, not from any peripheral cities."
Anticipating transborder traffic growth of 20-22 percent this year, Durrett said the airline already has put in place the majority of new Canada-U.S. routes, although it likely will add a few more this year.
It also will grow its capacity by upgrading the type of aircraft it uses, and increase codeshare agreements with its Star Alliance partner, United Airlines. Plans call for 194 codeshares this year, up from the current 75.
Meanwhile, Canada's other major carrier, Calgary-based Canadian Airlines International, announced a $3.78 million profit (C$5.4 million) of its own for the year. It, too, has benefited financially from Open Skies. It noted in the news release accompanying its fiscal results that its revenue base from the U.S. has grown from between $42 and $49 million before Open Skies to an estimated $217 million in 1998.