Competitive regional pricing tempers Air Canada’s transborder revenues

Washington DC
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Air Canada saw transborder passenger revenues fall 2.6% to Canadian dollar (C$) 589 million in the first quarter.

Capacity in this market increased 0.4% from the first quarter, primarily on routes to the eastern seaboard and Florida.

The drop in revenues signals increased capacity throughout the market on regional routes to US east coast cities like New York, Washington DC and Boston. Competitive pricing in the industry on these routes has caused these transborder revenues to deteriorate.

To address some of the pressures on routes in the eastern USA, Air Canada is transferring 15 Embraer 175 aircraft to Montreal-based Sky Regional to fly to those cities. So far it has shifted four of the E-175s out of its fleet and plans to have the rest moved within the next few months, the airline says.

Competitive pricing and increased capacity were also factors on routes in Toronto, Montreal and Ottawa as well as regional routes in Ontario, but overall domestic passenger revenues rose 1.5% in the first quarter to C$957 million on a capacity decrease of 0.6%.

Air Canada is working to lower its regional costs, however it spent C$8 million more on capacity purchase agreements in the first quarter compared to the same period in 2012. These costs totalled C$272 million in the quarter, caused by higher rates under a flying agreement with Jazz and increased block hour flying for Sky Regional.