Air Canada

The symbiotic relationship between Air Canada and its Toronto, Montreal and Vancouver hubs

An Air Canada 737MAX8 prepares for takeoff while a 777 lands at Vancouver International Airport.

As goes Air Canada, so goes Pearson.

When Toronto’s Pearson International Airport announced record passenger numbers in 2018, it brought into stark relief the close-knit relationship between Air Canada – the country’s largest airline – and its biggest hub.

While the airport handled just shy of 50 million passengers in 2018, what’s really interesting is that Toronto, for the first time, handled more passengers to international destinations than to cities in Canada. The point reflects just how much Pearson’s fate is influenced by Air Canada’s choices.

Airline executives told investors on Thursday that their strategy revolves around further building their Toronto operation into what they call “our global power-house.”

In fact, Air Canada’s strategy is more and more concentrated on funnelling traffic through its three Canadian hubs – the other two are Montreal and Vancouver – to major international destinations, particularly those that serve as hubs for partner airlines. As it does so, Air Canada concentrates on premium fares at the front of the plane, seeing large potential for growth in the market segment.

“The International Champions Strategy is centred around elevating the status of our three main hubs,” said Mark Galardo, Air Canada’s Vice-President of Network Planning at a presentation for investors in Toronto.

Data from Toronto Pearson International Airport show the increase in passengers to international destinations relative to destinations within Canada.

When you look at the percentage of seats Air Canada flies to various destinations over the last few years, the evolution becomes more clear. Since 2012, the airline has significantly added planes and new services to fly more than 50 million passengers last year. But the growth has been uneven.

In 2012, almost a third of Air Canada’s capacity – its available seats – flew routes within Canada. By last year, that share had fallen to less than a quarter. Instead, capacity has shifted to Europe (up from 25% of seats in 2012 to 30%), and Asia-Pacific and South America (up from 28% to 30%).

For most Canadians, having to connect is nothing new. People living in smaller centres have long grown used to changing planes once, twice, even three times to get where they want to go.

Where Air Canada’s strategy has shifted significantly is in its efforts to feed passengers from the United States to Europe and Asia.

The number of passengers flying from the United States to overseas destinations on Air Canada rose 132% in the past five years, and in 2018, it was the 10th largest airline on those routes, flying 1.3% of all passengers, despite forcing them to connect through Canada. Air Canada aims to increase that share to two per cent.

“Each hub offers a unique opportunity in terms of geography and demography, and therefore each is crucial to diversification of our network,” said Garlardo.

Toronto is Air Canada’s global hub. It’s so large, Air Canada’s operation in Toronto offers more seats to Europe than any other hub airport in North America, beating out Newark airport, where United Airlines has a massive operation. Toronto also sees a large concentration of flights to Asia and South America on Air Canada.

Vancouver is the second-largest hub on the continent to Asia, while Montreal serves to tap into the Francophone market, and has service to Air Canada’s only two destinations in Africa, Algiers and Casablanca.

Source: Air Canada

Air Canada plans to increase its global reach from its hubs, particularly Toronto.

“We continue to see an opportunity to eventually serve Africa” said Galardo. “Given that Toronto is one of the world’s most multicultural cities, we’ve identified Africa as a white spot in our network.”

At the same time, Galardo said AC’s Vancouver operation helps reduce the seasonal nature of air travel. In winter, when people generally don’t take holidays to Europe, they head instead to the South Pacific and India. That’s one of the reasons why Air Canada announced new service from Vancouver to Auckland, New Zealand. On top of that, the airline is eyeing service to southeast Asia from its Pacific hub.

It all adds up to growing global ambitions for Air Canada, though you will likely have to change planes to get there.

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