Air Canada tweaks model

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Air Canada is redefining itself as a “loyalty” carrier as it jettisons more of the attributes of a legacy airline.

Montie Brewer, Air Canada’s chief executive, is convinced that low-cost carriers have forever transformed the industry and legacy carriers must adapt. With little fanfare, Brewer has been changing Air Canada’s model to fit what he sees as the future.

Fare structures have been one of the most visible changes. He has moved away from sophisticated yield management programmes, which based fares on demand, to a simplified set of fares that are linked to various levels of service. Passengers pay more, for example, for in-flight meals, advanced seat assignment, lounge access, extra frequent flyer miles and the ability to make penalty-free last-minute changes. Air Canada tested these new fares in Canada and then in the USA.

Now it is extending them to select transatlantic flights, although they are more restrictive. Most require a return booking with a minimum stay, unlike North American fares. Some analysts claim this is due to less low-cost competition on overseas routes.

Passengers exercise many options when they book their flight and choose a fare level, but Air Canada is also moving towards the model used by a growing number of low-cost carriers of offering in-flight amenities for cash. These include snacks, pillows and access to in-flight entertainment programmes. Most of the standard offerings on legacy carriers are now extras on Air Canada. As Brewer explains: “Our costs are higher [than the competition], so we need to get more revenue.”

The loyalty part of Air Canada’s transformation comes largely from the sale of pre-paid passes good for a designated number of flights. It is also testing the reverse concept – unlimited flights for a limited period of time. On test routes Air Canada is offering a North American pass valid for two months. Many of Air Canada’s changes support the prediction by WestJet’s Clive Beddoe that legacy and low-cost carriers are moving towards convergence. ■

DAVID KNIBB / SEATTLE