Air Canada Rouge isn't the first airline-within-an-airline launched by Air Canada, but executives insist this time will have a different result.
New labour agreements that allow a lower cost structure is the change that Air Canada executives are depending on to achieve success this time.
"Our company is taking an important step in [its] goal to achieve sustainable profitability," Air Canada's president and chief executive Calin Rovinescu says 25 June during Rouge' launch event in Toronto.
Rouge is "fundamentally different" than other airlines-within-airlines, largely because it has "more attractive unit costs" that are in-line with other leisure-focused carriers, he says.
In a presentation at Air Canada's investor day in June, Rovinescu estimated that operating Airbus A319s under the Rouge brand will save the company 21% in its cost per available seat mile (CASM), while operating Boeing 767-300ERs under Rouge will save 29% in CASM.
Michael Friisdahl, president and chief executive of Rouge, tells Flightglobal on 25 June that Rouge will take over "under-performing", highly competitive leisure routes from Air Canada and "make them profitable again."
Rouge will initially serve three European destinations and ten Caribbean and Latin American destinations, but executives expect it to serve 23 destinations by the 2013-2014 winter season.
The Rouge fleet initially includes two Airbus A319s and two Boeing 767-300ERs, but the fleet will have 14 aircraft by the end of this year and eventually as many as 50 aircraft, executives say.
Rouge will acquire its jets from Air Canada as the mainline carrier renews its fleet with new aircraft, including five 777-300ERs being delivered through February 2014 and 37 787s being delivered through 2019.
With 50 aircraft, Rouge would be much larger than previous low-cost carriers established by Air Canada.
In 2001, the company launched no-frills Tango, which served high-traffic routes with 13 Airbus A320s. Then came Zip in 2002; it primarily served western Canadian markets with a fleet that reached 12 Boeing 737-200 aircraft.
Air Canada shuttered Zip and Tango in 2004, noting that labour concessions with union groups made the carriers unnecessary.
Carve-out labour agreements
Now, Air Canada says new labour concessions, plus the distribution heft of Air Canada and Air Canada Vacations, will help Rouge succeed.
Executives have positioned the carrier as hip and young, noting that it launches with 127 newly-hired flight attendants.
A few dozen of those attendants attended the launch event on 25 June, and most appeared to be in their 20s. They wore Rouge uniforms, which consist of burgundy sweater vests and narrow-brimmed fedoras called trilby hats.
Rouge flight attendants belong to the Air Canada Component of the Canadian Union of Public Employees (CUPE), which represents some 6,500 Air Canada flight attendants.
But they work under a "supplement agreement" to the main collective bargaining agreement, says Michel Cournoyer, president of CUPE's Air Canada Component and temporary president of the Rouge flight attendant group.
Hourly pay for Rouge attendants starts at C$22.99 (US$21.92) and caps at C$36.03 after five years of service, says Cournoyer, adding that the Rouge contract was "negotiated in good faith."
By comparison, mainline Air Canada attendants start at C$24.40 hourly and cap at C$51.22 after ten years, he says.
Rouge attendants don't share seniority dates with Air Canada attendants.
Work rules are different, too. While Air Canada attendants can contractually work up to 100 hours monthly, Rouge attendants have no monthly duty cap, says Cournoyer.
There is no federal duty-time cap for flight attendants in Canada.
Also, Rouge attendants can fly after 14 hours of rest following an overseas flight, while Air Canada attendants must contractually take 24 hours of rest.
Those differences trouble Cournoyer.
"Rouge flight attendants offer the same good service and should benefit from the same working conditions [as Air Canada attendants]," he says. "It's a shame that Air Canada implements a two-tier system at the expense of flight attendants."
Also, unlike Air Canada attendants, Rouge attendants are trained by The Walt Disney Company in Orlando. Upon hiring, they must agree to pay C$49 monthly for three years to help cover expenses incurred during training.
The airline has said the fee is for "incidentals," according to reports.
But those fees aren't incident to flight attendants earning entry-level Rouge wages, says Cournoyer.
"They are young flight attendants [living] in a very expensive city like Toronto," he says.
Lower pay, pilot opportunity
Rouge launches with 50 Air Canada pilots who have bid to fly Rouge routes.
They are represented by the Air Canada Pilots Association, but work under a carve-out agreement that was approved by a federal arbitrator in July 2012 following 19 months of negotiations.
Rouge pays pilots at a lower scale than mainline pilots, but moving to the brand can allow pilots to fly larger aircraft, the union says.
For example, an A320 Air Canada pilot could move up to a Rouge 767.
Rouge pilots are also exempt from duty time limits specified in the mainline agreement, meaning they can fly up to federal duty time limits, say the union.
Estimating pay differences between pilot groups is difficult due to duty time differences and other factors, the union says.
Executives say denser seating on Rouge aircraft will generate cost savings.
Rouge's A319s have 142 economy seats, including 24 "Rouge Plus" seats with more legroom.
The 767-300ERs will eventually be configured with 282 seats, including 230 economy seats, 28 Rouge Plus seats and 24 "Premium Rouge" seats.
By comparison, mainline Air Canada A319s have 120 seats and most of its 767-300ERs have 211 seats, according to Flightglobal's Ascend Online database.
Southward bound
Rough launches 1 July with A319 flights to Jamaica, three cities in the Dominican Republic, four cities in Cuba and two destinations in Costa Rica.
Initial trans-Atlantic routes include those from Toronto and Montreal to Athens in Greece, and from Toronto to Edinburgh in Scotland and Venice in Italy.
Dublin, Ireland is also on the route map.
By the 2013-2014 winter season, executives say Rouge will add routes to St. Kitts, Exuma in The Bahamas, Curacao, four cities in Mexico and the US cities of Las Vegas, Orlando and Sarasota, Florida.
Rouge faces no shortage of competition on those routes, many of which are served by Canadian carriers WestJet, Sunwing and Air Transat, and Caribbean Airlines, based in Trinidad and Tobago.
Source: Air Transport Intelligence news
