Air Canada has struck a five-year commercial agreement with the Greater Toronto Airports Authority (GTAA) to bolster Toronto Pearson airport’s presence as an international gateway.
The new agreement, effective 1 January, will improve baggage delivery and the times it takes for aircraft de-icing , say the parties.
The new agreement will allow the carrier to pick up additional frequencies to markets that it already serves and add new destinations, but how many new flights will be available is unclear. Air Canada operates 380 return flights out of the airport per day to 136 destinations, including 16 in Europe and the Middle East and six in South America.
The carrier recently announced plans to significantly expand its presence in Europe by adding new service to Milan, Lisbon, Nice and Manchester from its Canadian hubs next year. It is also expanding non-stop Toronto-Istanbul service to daily flights and providing non-stop service to Barcelona from Toronto and Montreal through its low cost carrier Rouge.
Under the airport deal, Air Canada will incur fixed aeronautical fees, including landing and apron fees as well as terminal charges. The non-exclusive agreement is dependent on Air Canada meeting certain passenger volumes, says a news release. The carrier can also gain rebates for incremental passenger growth above certain targets.
Air Canada’s own goals to expand internationally entail adding millions more passengers to its network.
During Air Canada’s 10 June investor day, the carrier presented an analysis showing that it could be capturing about 1.5% of the market for flights from the USA to Europe and Asia. However, the carrier is serving only about 0.3% of that market now, said chief commercial officer Benjamin Smith.
Growing that segment to its full potential would mean adding 1.1 million passengers each year, representing an annual revenue increase of more than Canadian dollar (C$) 400 million ($389 million).
Air Canada’s management has underscored the importance of growing sixth freedom traffic in recent months. In 2012, Air Canada increased its sixth freedom traffic at Pearson by by 21% compared to 2011 levels and hopes that features such as customs pre-clearance to the USA as well as automatic baggage transfer on transborder flights will contributed to further growth.
In a speech to the Canadian Airports Council in April, the airline’s president and chief executive Calin Rovinescu said that the airline has increased such traffic through its Canadian hubs by nearly 120% since 2009. That increase at Toronto Pearson specifically throughout that time totals about 150%.
Rovinescu has encouraged Canadian airports to reduce airport fees as it embarks on this expansion. In that speech, he noted that the carrier spent C$992 million on these navigation fees in 2012.
“While there is no doubt we get a great deal of value for this expenditure, airports must be at least as vigilant about containing and reducing costs for airline users as we are,” he said, encouraging airports to find additional revenues through means such as retail.