Air Canada's plan to launch a low-cost unit could be frustrated by conditions tied to its take-over of Canadian Airlines. The group also faces having to put its regional airline unit up for sale as a price for the takeover.
Robert Milton, Air Canada's president, has announced plans to launch a low-cost airline in the second half of this year. It is to be based in Hamilton, Ontario. Milton says this unnamed carrier, which the industry has dubbed Air Canada Lite, will start with domestic flights but eventually operate into the USA. Florida is one possible destination.
One of the conditions Ottawa imposed when it approved Air Canada's takeover of Canadian was that Air Canada wait to launch any discount airline from Hamilton until September. If another airline started Hamilton services in the interim, Air Canada was to delay any Hamilton launch until September 2001. The purpose of this, Ottawa said, was to give competitors a head start.
A standing committee of parliament has stressed that it wants the transport ministry to ensure Air Canada will abide by conditions designed to lower or eliminate entry barriers for new and existing airlines. The ministry replies that it is satisfied with Air Canada's promise to delay any discount airline in eastern Canada.
WestJet launched Hamilton flights in March and plans to build its Hamilton hub for eastern Canada operations. The Halifax-based IMP Group also has revived plans to launch a discount airline called CanJet this summer.
CanJet has not said where it will base operations, but earlier it picked Hamilton. Air Canada appears to be heading for a showdown with its own Hamilton plans.
Meanwhile, Air Canada must put its subsidiary Canadian Regional Airlines up for sale as part of its takeover agreement with the Canadian authorities. However, Milton, predicts that no buyers will come forward.
Source: Airline Business
