Air Canada T.AC

Doom for another Canadian Airline

[thinkyourmoney]

The best analysis I have ever read as an armchair Economist is that the Canada air line market has room for only 2 entrants...one international carrier and one domestic carrier.  It is a reality that plays out over and over again ever since HH stated it over 30 years ago.
One of the first casualties after this analysis was CAIL.   AC and CAIL were pitted head to head in a competition for the Canadian Airline market.  By the time a merger was forced upon them, Canadian was flat broke.  The merger also destroyed all equity in Air Canada and burdened it with enough debt and obligations to take it into a corporate restructuring shortly after the merger.
You may ask, what for?  What was the prize.  The answer is that the prize was the international air routings out of the 3 best suited airports in and out of North America.  The Canadian government negotiates and the gives access to service these routes to qualified Canadian airlines.  After 2001, there was only one such airline left in Canada. And it is still that way.  The Canadian government has so many routes that there are not enough airplanes or at least an airline that has enough planes to service all of these runs and make a  profit.  Some of the dormant runs are still  too lean but the A321XLR is exciting because you will now see AC start to service non stop routes that most folks did not even know existed between Canada and Europe (and the world).
AC  has their WB aircraft flying just about everywhere they did before Covid and are adding some new destinations.  Going forward this market will expand to a new level .


The domestic market is divided into 2 sectors.  One is for completely domestic routes.  This is a niche market and it is very lean.  Air Canada is in the domestic market but a lot of their seats are filled by their own customers (Star Alliance) connecting to international flights.  That leaves the domestic market open for airlines serving Canadians flying within North America and serving connecting passenger connecting to international flights on airlines other than Star Alliance Carriers.  There is not a lot left of the market for discount carriers to make a go of it.  History has proven this to be true in that none...not any ever survive.

The reality is bourne out in that 74% of Air Canada's flights begin or end in another country.  AC serves 6 continents.  They are that international company in and out of Canada.  Of the flights that are domestic, most of the seats are bringing people into AC hubs for taking them to far away destinations or taking them home.  A lot of the customers who fly in Canada on domestic flights are part of the Aeroplan program.  

What was the reason Air Canada went through that merger in the early 2000s?  It was to set up what is happening today and going forward.  They really nailed it.  Air Canada is that international airline for Canada.  It just is.

More later.

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[Rouge10]

Thanks thinkyourmoney You got it right. AC is focused on International business and there is plenty more to be captured. I also found below two articles interesting and informative: https://calgaryherald.com/business/local-business/why-swoop-failed-ultra-low-cost-carriers-ulcc-canada https://calgaryherald.com/opinion/columnists/opinion-why-canadians-cant-have-ultra-low-cost-air-travel

[JuIieRichards]

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