ANALYSIS: The week that shook Canadian aviation
So this is what happens when a market starts to turn stagnant.
After transporting record numbers of passengers in 2018, both Air Canada and Westjet came into 2019 predicting that Canadian domestic aviation growth would be minimal. The markets that could be tapped were already being served and there simply wasn’t that much of the travelling public left to conquer.
That it only took a few months for the airlines to come up with responses to the stagnation is nothing short of breathtaking.
Air Canada announced Thursday it had a 30-day window to negotiate a purchase of Air Transat, while Westjet announced Monday it would be bought by Private equity firm Onex. Both deals have to clear hurdles before they can be finalized.
Air Canada came into 2019 with very little domestically on its plate. Q400 aircraft would be shifted west to Vancouver, Rouge would take over some flights in the East, but otherwise, the airline would spend the year targeting the premium market. Its strategy for growth revolved around putting more people through its three hubs in Toronto, Montreal, and Vancouver.
Key to the airline’s success would be connecting Canada hubs with international hubs while at the same time convincing a growing number of people travelling from the United States to Europe that it was faster, easier, and more comfortable to get there through Canada.
And the plan has worked. In the first quarter of 2019, the airline reported that overall traffic was up more than four per cent, but business class revenue was up a staggering 12%.
“We were particularly pleased with our performance to the UK,” said Lucie Guillemette, Chief Commercial Officer for Air Canada, in an April conference call with analysts.
Over at rival Westjet, the plan for growth this year has also hinged on attracting more premium-paying passengers, both domestically, with the gradual introduction of a true business class, and on flights to Europe. Their plans for growth in the domestic market, at least for mainline Westjet flights, was minimal at best, with only one new domestic route announced, from Edmonton to St. John’s.
So now each has devised new ways to grow. If you read carefully, it’s clear that both continue to see their opportunities lie beyond the Canadian domestic market.
For Westjet, that means throwing itself into the deep pockets of Onex, a private equity giant, to give the airline time to grow, as chief executive Ed Sims put it, “To, from, and within Canada.” Tellingly, Canada’s domestic market came third in his list.
Not to be outdone, in announcing its intent to buy Transat, Air Canada speaks of creating a “Global leader in leisure, tourism and travel distribution offering Canadians choices to more destinations and promoting two-way tourism (emphasis added).”
In concentrating on international routes, both airlines have opened themselves up to competition at the lower end of the domestic market. Edmonton-based Flair Air is in the midst of a rebuild after a turbulent first year, concentrating on the Canadian market this summer to re-establish its brand and build a following.
And Canada Jetlines confirmed Thursday plans to lease a pair of A320 aircraft and launch low-cost service from Vancouver on December 17.
It all points to a new maturity in the Canadian domestic aviation market, and this week, that market just grew up.