Zip, Air Canada's discount unit for western Canada, resolved last-minute labour disputes and took to the air on 22 September, but the debate is far from over.
Transport minister David Collenette did everything he could to talk Air Canada out of launching Zip, arguing that the major should stick to its full-service model and not try to "hammer every little guy on the block to death". Yet the minister admits he has no authority to stop the launch.
But bellicose remarks from rival WestJet, which will be most affected by Zip, point to a probable showdown under Canada's competition law. Clive Beddoe, WestJet's chief executive, calls Zip a "fighting brand - a cross-subsidised brand set up by a company to destroy or undermine a competitor". Such brands are illegal, he insists.
Zip is artificially creating its costs. Air Canada is providing services to Zip at [so-called] open market rates," he adds. Unlike Tango, Air Canada's low-fare brand launched in late 2001 with routes out of Toronto, Zip is being operated as a wholly-owned independent subsidiary.
According to Beddoe:"All you're doing is taking it out of one pocket and putting it into another. You're not changing the costs. They will claim it's profitable, undoubtedly. They will make it profitable, but at the expense of Air Canada."
Stephen Smith, Zip's president, disagrees, citing the concessions flightcrews have made so that Zip could launch. Zip's goal, says Smith, is to cut costs to 30% below Air Canada's, either through higher productivity or lower wages.
The dispute could go to competition tribunal, which is about to resume trial on a complaint by WestJet against Air Canada for predatory behaviour.
Source: Airline Business
