Maple Leap: Air Canada’s turnaround ranks up there with the best. But what’s next?
What’s the greatest airline turnaround story of the past decade? There is no shortage of candidates, from Delta to Japan Airlines to Avianca.
And what about Air Canada?
Bankrupt in the mid-2000s and almost bankrupt again a few years later, Canada’s largest airline is today not just solidly profitable, but also almost as profitable as its longtime LCC tormenter WestJet—Air Canada’s operating margin last year was 10%, within a point of its rival. What’s more, Air Canada has stunned the industry by becoming one of the planet’s fastest-growing airlines intercontinentally, adding longhaul routes with breathtaking regularity from Toronto, from Vancouver and from Montréal—all of this at a time when U.S. rivals are barely growing, Gulf carriers are in retreat and other comparably aggressive longhaul carriers like Norwegian and Hainan Airlines expand with much shakier business models. Not bad for a legacy carrier once known for bloated costs.
At an investor day event last week, Air Canada told the tale of how it rose from the ashes. More importantly to those in attendance, it also explained what lies ahead and how it intends to further improve. Its 10% operating margin last year, after all, solid though it was, doesn’t quite match the success of Air Canada’s Big Three U.S. peers. The airline must ensure, furthermore, that it can retain its upward momentum in a Canadian airline sector that’s bracing for big changes, most importantly the advent of new low-cost carriers both domestically and transatlantically, and WestJet’s push into overseas and ULCC flying.
Many of the strategies fueling Air Canada’s turnaround remain active and relevant. Pricing tactics like fare families are now so globally ubiquitous that it’s easy to forget Air Canada was one of the world’s first airlines to offer them. And there’s more juice left to squeeze from the hunt for sixth-freedom traffic, specifically travelers flying between the U.S. and points overseas via one of Air Canada’s three main hubs. Last year alone, the airline’s international connecting traffic increased more than 20%, boosted by the availability of many new destinations. From Toronto alone, Air Canada added Tokyo Haneda and Milan in 2014; Amsterdam, Delhi and Dubai in 2015; Seoul in 2016; Mumbai in 2017… and those are just the new mainline routes.
Rouge, Air Canada’s lowercost unit, was just as instrument- …
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