Air Canada to create discount airline

[dcabrown]

From the Globe and Mail:

Air Canada (AC.B-T2.280.083.64%) plans to create a discount leisure airline to compete on routes to Europe, Mexico, the Caribbean and other popular vacation spots, a move that will ratchet up the competitive pressure on tour operators such as Transat A.T. Inc.
The country’s largest airline is actively drawing up a business plan to launch a low-cost carrier (LCC) with four Boeing 767s and six Airbus A319s, with the potential to increase that fleet to 50 planes, according to a letter of understanding attached to the tentative labour pact between the company and the Air Canada Pilots Association.
“The mandate of the LCC will be limited to the market segment seeking low-cost air travel,” according to the letter. “The LCC is not intended to replace mainline routes the company considers financially viable. The LCC’s success and viability depends on the parties’ ability to fulfill this mandate on a competitive basis.”
The project is the latest sign of the airline’s aggressiveness as it claws its way back from the financial difficulty it got into during the recession. In addition to the new discount carrier, Air Canada recently said it would return to Billy Bishop Toronto City Airport, a decision aimed at recapturing market share among business travellers that it has lost to upstart Porter Airlines Inc.
Air Canada envisages having 30 Airbus planes and 20 Boeings in the new division. Those planes can carry between 120 and 213 passengers in their current configurations, but business class would be removed for the discount airline and replaced with “premium economy” seating.
The airline and the pilots’ union have agreed to negotiate a pay structure for the discount unit.
“Air Canada and ACPA wish to establish a labour relations structure covering the pilot-employees of the low-cost carrier,” said the letter. A new lower-wage classification of pilots would be started, though the letter cautions that “the full scope and details of the terms and conditions governing the LCC cannot be realistically contained in this LOU [letter of understanding].”
Transat is the country’s largest tour operator, followed by fast-growing Sunwing Travel Group, which merged in 2009 with Signature Vacations.
Other tour operators vying for Canadian leisure travellers include WestJet Vacations and Thomas Cook Canada Ltd.’s Sunquest Vacations. Air Canada competes in the charter market through its wholly-owned division, Air Canada Vacations.
Air Canada Vacations already operates in markets such as Mexico, the Caribbean, U.S. sun destinations, Europe, Central and South America and Asia, but its tour packages generally target mid- to higher-end travellers in the charter sector.
ACPA spokesman Paul Howard declined to comment on the letter of understanding, which is dated March 17, noting that union negotiators only began to publicly unveil the tentative agreement Monday in Vancouver, the first stop in a cross-country tour this week to provide details to more than 3,000 Air Canada pilots. ACPA’s master executive council has authorized an April 15-27 ratification vote for the tentative labour pact reached last month.
“We wouldn’t comment on the substance of a collective agreement before we’ve even briefed our own members on it,” Mr. Howard said, noting that additional meetings with pilots will be held this week in Winnipeg, Montreal and Toronto. “We’re in the process of explaining what’s in the agreement.”
Air Canada declined comment.
ACPA is the first of the airline’s unions to agree to tentative contract terms.
The Canadian Auto Workers union, which represents customer service agents and call centre staff, resumed bargaining last week aided by a federal conciliator. Management proposals on table include the creation of new classifications in call centres, says the CAW, whose collective agreement expired Feb. 28.
The Canadian Union of Public Employees began labour talks last week on behalf of flight attendants, while the International Association of Machinists and Aerospace Workers has scheduled introductory bargaining meetings this month with Air Canada.
Labour pacts at ACPA, CUPE and IAMAW expired March 31.

[OceansEdge]

I'm confused - didn't they try this already?

[teacher]

I NEVER EVER EVER want to hear any Air Canada pilot EVER AGAIN say that Jazz is lowering the bar if this is approved. Status pay is one thing, actually getting paid less to do the same flying is something else. I will reserve final judgement however until the payscales are released assuming this actually goes forward.

[Big Pistons Forever]

If you want to know where this is going just talk to any US Air pilot. They are living life at a legacy carrier pretending to be a LCC, and it is not pretty........

[gonnabeapilot]

If ACPA allows this, we all lose. Why Air Canada feels like it needs to be all things to all people is a mystery to me. The vacation charter market is probably the most competitive out there and also carries with it some of the smallest profit margins. Allowing this will create a 2 tier (or 3 tier depending on how you feel newbies are treated) pilot organization with-in ACPA... a fractured group is never a strong group. It will place downward pressure on Transat pilots to keep costs in check next time they go to the negotiating table so they can retain a competitive edge. It will encourage Sunwing and Canjet to continue expanding the amount of cheap foreign pilot labour they use so they can retain their competitive edge. It will also place pressures on Westjet's expanding vacation business. More importantly... unless they figure out a way to get the same concessions from every single one of their major unions and every single employee group that will touch this operation, IT WON'T WORK!! The only thing this will do is squeeze Air Canada's already slim profit margins and have them demanding big concessions from ACPA in 2015 when they go back to the table, not to mention drag the rest of us down in a messy race to bottom. This is a bad idea all around and I hope that the ACPA membership can see where this is headed long term, even if their executive can't. For the sake of every professional pilot in Canada, they need to vote this down.

[ScurvyDog]

This sounds like Tango all over!!

[bombardierfixer]

Sounds more like a shot across Jazz's bow to a certian degree. Aren't they negotiating some sort of contract right now? Or am I out in left field?

[swordfish]

There are literally hundreds of other strategies for Air Canada to lose more money other than starting up (ANOTHER) low-cost carrier. Although this IS a tried-&-true never-fail money loser, there are lots of faster - though more painful - ways to lose money.

Then again, we need a flag carrier experienced at losing propositions, to be truly successful at it....we should all wish them the best. Competing in a market in which they are totally out-of-their-depth without the skills, resources, and understanding of the LCC model is a sure-fire way to achieve their goal.

Isn't AC mainline losing money fast enough for ACA Holdings?

[iflyforpie]

Air Canada reminds me of General Motors. Always coming up with some new brand or frill to try and fool the unwary customer. The paint companies must have made a fortune. Jazz (then part of Air Canada), Tango, Zip... good god!

I still remember the first (and last) Jazz Flight I went on. I wasn't even sure which airline I was flying since we went out on a F28 still in Canadian Regional colours and were coming back on a Dash 8 with a very new paint job but an obviously Air BC interior. We get settled and the flight attendant starts serving 'lunch' (it was printed on the ticket) which consisted of snack bags and juice boxes. She said it was an attempt to 'be more competitive'. Great, legacy carrier prices, LCC service (minus the smiles and jokes).

The only reason why I flew Jazz was because in early 2002, West Jet was still flying mainly -200s and didn't go to Hawaii. So we booked a package deal on an airline we hoped wouldn't go bankrupt (C3000) and leave us standing. Ironically less than a year later, they declared bankruptcy too.

[cossack]

Do I have this right? AC wants and gets government protection from Emirates and Etihad, yet is allowed to prey on smaller carriers here. Doesn't seem right somehow.

[Jastapilot]

Is this Zip 2.0 or Tango 2.0? I'm confused. If this gets voted through I'll have an even lower respect for the ACPA boys and girls... and it's already low enough.

[Rowdy]

It was mentioned to me that the AC 'low cost carrier' would employ NEW FA's... as the current group has not negotiated for this, nor would a lot of those old cronies want to be part of a low cost package!

[dream_big]

How about the front end crew? Would they be acpa boys too or would it be an entirely different group employing these pilots? I don't understand how this is in any way an incentive for acpa pilots. This sounds completely ridiculous, and have no idea why any acpa member would vote yes on this.

on a side note, the pilots that worked zip (or whatever it was called before) and such in the past, im not too familiar with it. what happened to those pilots after it didn't work out? were they kicked out onto the street?

[SII]

Both Zip and Tango were ACPA and the pilots were absorbed into the system

[righthandman]

Air Canada reminds me of General Motors.... SNIP....

The only reason why I flew Jazz was because in early 2002, West Jet was still flying mainly -200s and didn't go to Hawaii. So we booked a package deal on an airline we hoped wouldn't go bankrupt (C3000) and leave us standing. Ironically less than a year later, they declared bankruptcy too.

Just for the record: C3 (abruptly) ceased operations Nov. 9, 2001 two days after my last flight as an F/O there. Roughly 4500 people including 650 pilots lost their jobs overnight.

[CanadianEh]

Anyone else think this might be some sort of tactic for labour negotiations? It's funny how they announce this right after 3 unions contracts expired on March 31. Any thoughts

[TAT]

Hey guys, what your all forgetting is ACPA has always been supporting change in CARS for duty times and ect. We have always had more stringent duty requirements in our books but for some reason other carriers are not following suit... others are employing foreign pilots while other Canadian pilots are laid off but thats ok.... You guys want us to stand up for the rest of the pilots in Canada and have the highest wages best contract out there while you'll go to the next carrier that starts up and gives you S*** working conditions... Its time we take back the work we have been losing to these carriers enough is enough...

[FICU]

So you want your market share back? ... as an Air Canada pilot will you also accept Canjet wages to get it?

For the sake of our profession do not lower the bar further!

[justwork]

I think Air Canada should focus on making Air Canada good before they start screwing something else up.


If I were to think of the fundamentals of a LCC they would be:
-Single class seating
-Single type of aircraft

and I quote

The country’s largest airline is actively drawing up a business plan to launch a low-cost carrier (LCC) with four Boeing 767s and six Airbus A319s

The aircraft will be configured either with a single class or with economy and premium economy seating, note the reports.

They've got it wrong before they even pull the chocks by messing with 2 different types and having different classes. I think Air Canada's business plan for a LCC will be to operate exactly how they do now, maybe charge your for your bags and provide less leg room, and to make it "low cost" they'll just find guys that will work for pocket lint and expired peanuts...

We'll see though. Public perception of government bailouts couldn't be worse, I imagine if this puts AC deep enough in the red it will actually have consequences for Canada's "flag carrier" barf.

What I would like to see, Air Canada almost go tits up and ask for money from the government. The government telling them to shove it, and then WS pick up a couple dozen 787's to fill the void.

http://www.aviationweek.com/aw/generic/ ... 0-%20Again

[Localizer]

Hey guys, what your all forgetting is ACPA has always been supporting change in CARS for duty times and ect. We have always had more stringent duty requirements in our books but for some reason other carriers are not following suit... others are employing foreign pilots while other Canadian pilots are laid off but thats ok.... You guys want us to stand up for the rest of the pilots in Canada and have the highest wages best contract out there while you'll go to the next carrier that starts up and gives you S*** working conditions... Its time we take back the work we have been losing to these carriers enough is enough...

ACPA has been supporting change in CARS and FDT's yet with this LCC program, all that goes out the window. So much for all that positive change .. wasted in one shitty (concessionary) TA.

In regards to the rest of your post .. it seems like all the non-ACPA pilots should just sit at home and starve .. true "Champions of the Industry" ..

[altiplano]

Not only are they selling out on wages with this new LCC lower tier members of ACPA - They're selling out all new hire pilots to "mainline" by pulling pensions. Buy your own RRSPs from now on guys... Shameful voting new employees out of benefits...

http://www.ctv.ca/generic/generated/sta ... 82289.html

“All new hired pilots after April 1, 2011, will be on the DC plan,” according to the tentative deal between the carrier and the union. Though few are likely to do so, the agreement also said that “pilots hired after Nov. 1, 2010, will have a one-time opportunity to switch to the DC plan.”

[TAT]

Hey guys, what your all forgetting is ACPA has always been supporting change in CARS for duty times and ect. We have always had more stringent duty requirements in our books but for some reason other carriers are not following suit... others are employing foreign pilots while other Canadian pilots are laid off but thats ok.... You guys want us to stand up for the rest of the pilots in Canada and have the highest wages best contract out there while you'll go to the next carrier that starts up and gives you S*** working conditions... Its time we take back the work we have been losing to these carriers enough is enough...

ACPA has been supporting change in CARS and FDT's yet with this LCC program, all that goes out the window. So much for all that positive change .. wasted in one shitty (concessionary) TA.

In regards to the rest of your post .. it seems like all the non-ACPA pilots should just sit at home and starve .. true "Champions of the Industry" ..

You seem to be ok with can jet and sunwing doing it.... I'm not supportive of this contract but we do have to think of the way things are done. We are not on the same playing field. Jazz with TC is already setting the pAce. Keep in mind boys this is just a TA.

[gonnabeapilot]

Hey guys, what your all forgetting is ACPA has always been supporting change in CARS for duty times and ect. We have always had more stringent duty requirements in our books but for some reason other carriers are not following suit... others are employing foreign pilots while other Canadian pilots are laid off but thats ok.... You guys want us to stand up for the rest of the pilots in Canada and have the highest wages best contract out there while you'll go to the next carrier that starts up and gives you S*** working conditions... Its time we take back the work we have been losing to these carriers enough is enough...

There are so many things wrong with this statement, it's not even funny. The first thing is the arrogance you show towards others in aviation. Would I like to be working for Air Canada right now? Yes. However I did the interview and they decided they didn't want me. What would you have me do? Head down to flight operations, cross my legs and hold my breath until they give me a job? I may not have working conditions that rival those that ACPA has negotiated, but I make more money now flying a 737 than I did flying a King Air and unfortunately, I've got bills to pay. So again, what would you have me do? Speaking of money, I would like to point out that out of all the major airlines in Canada, only Jazz offers a lower starting wage than Air Canada. So really who is the one willing to accept s*** working conditions?? Perhaps you should look in the mirror a little closer.

As far as you taking back the work that you have been losing, don't make me laugh. This work was never yours to begin with. Air Transat has been in business for 20+ years and during the growth of Air Transat and the rise and fall of Canada3000, Air Canada chose to essentially sit on its vacation product. I would argue that it wasn't until the success of Westjet Vacations that somebody at Air Canada sat up and took notice of the fact that perhaps they could leverage the AC Vacations brand into something much greater than what it has been. This is about Air Canada trying to grow its business into a market where it has been dormant for far too long. Take back the work you have been losing? This is about trying to destroy the work that others make their living on.

I would also like to ask you if you actually think this new business venture will benefit those at ACPA?? I can see the angle from Air Canada's perspective. 'Hey, once the 787s come, we're going to have a bunch of surplus 767s. Let's strip out the interiors and run them on the charter markets. Maybe make a few bucks. I bet we can even get some concessions from the employees to make it a bit more lucrative'. But just exactly what are those charter markets??? Air Canada has said that this unit could grow to encompass 50 airplanes!! That equals the combined winter capacity of Sunwing, Canjet and Transat. You talk about these carriers using foreign aircraft and pilots during the winter, but do you understand that it is because the market doesn't exist to the same extent in the summer?? So how long do you think it will be before Air Canada decides that a lot of its summer seasonal routes are a better fit for its new leisure carrier?? Congratulations, because you have just succeeded in allowing them to replace 2 high-paying ACPA jobs with 2 much lower-paying ones.... all so you can beat your chest and claim you are now serving more of the market. Are you really a pilot or do you secretly work for management?

Finally, let's talk about market share for a second. Because it seems to me like those at ACPA are willing to sell their souls as long as it means there is a chance of getting one more airplane. Bigger isn't always better. In the past, has Air Canada shown it's willing to do what it takes to try and take out the competition?? Yes. Are things very different this time around?? Yes. Take it from someone who knows, when it comes to cost there is absolutely no way that Air Canada can compete in this market. There is a reason why AC Vacations traditionally only sells high-end vacation packages. It is because it is the only segment of the market where there is a profit margin to be had given Air Canada's cost structure. Now I understand that those at ACPA are willing to chop their salary and working conditions because they start getting excited at the thought of more airplanes, but is everyone else at Air Canada?? Your attitude shows that you obviously think that the world revolves around an ACPA member, but when it comes to the vacation market I can promise you it does not. If you were to look outside the flight ops world for a second, you would see your competitors are travel companies that are built upon paying every member of their staff half of what those same positions at Air Canada pay. These people make peanuts and yet they are some of the most productive employees going because of how the whip is cracked. Is it right? No, but there is a reason for it. It's the vacation divisions that drive the airlines, not the other way around. So from the ground up, every aspect of these companies is built on the cheap because the profit margins on a low to mid range vacation package are razor thin and consumers in this market, shop with their wallets. You wouldn't believe how many times I've had the following conversation with passengers after a flight:
"Hey, just wanted to say that this was the best vacation we've had... you guys are the greatest"
"Glad to hear it. So I guess we'll see you again next year?"
"Maybe, it'll depend on whether or not you guys are still the cheapest".
So will Air Canada be able to steal business away?? You bet. Will it be able to make money while it does it?? I highly doubt it. And unfortunately, Air Canada isn't exactly in a good position right now when it comes to its ability to piss away money. So where does that leave you come 2015 when it's time for contract negotiations? I would argue it's better for everyone at ACPA to be negotiating with a profitable airline that has grown slowly than it is to be negotiating with a company that is bleeding financially because it's in a desperate fight for market-share.

If ACPA wants to allow this to happen, fine, roll the dice. But I would encourage you to think about the long term implications on your own group before you hand the company a free pass to start building an airline with-in an airline. Don't forget that Milton always said he wanted Air Canada to be an international carrier with select domestic service on high yield business routes.... don't be surprised if you see your flying replaced by members of your own association who are doing it on the cheap at this new carrier. And unlike the situation with the Jazz flying, you won't have anyone to blame but yourselves.

[c170b53]

Hello its contract time..... its April 1 all over again, its divide and conquer, feign and distract. Its really all about our pension plan. As for the 767's, (The Chev Impala of the sky), they are just about at the end of their useful life.
As for LCC's I wrote this in another thread;
LCC's, like fruit stands, flourish in the summer months, their lack of infrastructure makes them successful in combating short term market conditions (on the corner weekends, gone weekdays) but will everyone switch supermarket roasts for 7-11 tube steaks? Yes I'm being silly but those getting riled up over a contract opener are doing just the same.

[c170b53]

What we really need is a LC CEO
From the G&M

Air Canada posted a $107-million profit in 2010, compared with a $24-million loss in 2009. The circular reiterated that if Mr. Rovinescu remains with the carrier on March 31, 2012, he “will be entitled to a one-time retention payment of $5-million,” as detailed in his 2009 employment agreement, originally disclosed a year ago.