The two Canadian majors are prepared to support the concept of US-Canada open skies, but are split on the phase-in period and remain doubtful whether their US alliances will help put them on an equal competitive footing with the larger US carriers.
US and Canadian negotiators appear set to open formal, 'fast-track' bilateral liberalisation talks by February with the major issue still the length of the proposed phase-in to open skies. The two Canadian carriers differ, however, on which markets should remain protected by the phase-in.
Canadian Airlines International supports opening up the whole market including Toronto/Pearson, which accounts for half of the US-Canada O&D market, but wants to see a gradual approach. 'A period of three to five years we would find acceptable,' says Peter Wallis, vice president of government and regulatory affairs.
Air Canada, on the other hand, is prepared to open up the US-Canada market immediately. But the qualification to that, says Air Canada's vice president of government relations Sandy Morrison, is that Canada's three primary markets - Toronto, Montreal and Vancouver - would be phased in over a three-year period. The phase-in period is required because more US than Canadian carriers operate out of those three cities.
Neither carrier has a problem with US airlines serving Canada from their respective hubs, which carriers like Delta are demanding, as long as this right is introduced after the phase-in period expires.
One of the cloudy areas is how Air Canada's alliances with Continental Airlines and United Airlines, and Canadian's link with American Airlines, will work in a liberalised environment. Some analysts believe the Canadian carriers must use these ties to gain greater access to gates and slots south of the border. Canadian and American are in talks on codesharing, but even a marketing link doesn't guarantee improved operational access to US markets. There is no indication that the partnership 'will help us resolve that problem,' says Wallis.
Another roadblock facing Canadian is where to find sufficient aircraft to serve the US market. The Calgary-based airline has recently completed a massive restructuring, but is still saddled with more than C$2 billion (US$1.46 billion) in long-term debt and obligations, such as aircraft leases, and has little room to manoeuvre.
Air Canada is also dismissive of suggestions that its US partners will help to obtain greater access at US airports. However, the carrier is in a much better position than Canadian to tackle increased competition. The carrier has a 105-aircraft fleet, versus 83 for Canadian, and is adding capacity almost daily. Its order list includes 24 Canadair RJs and 24 Airbus A319s. Within two years Air Canada's fleet will have grown to 130 aircraft.
Even so, Air Canada will remain dwarfed by most US players, which are up to four times the size and another reason why Canadian carriers need the transition period, says Morrison. We're already way back in the starting blocks, because the US carriers already dominate.'
Even so, Air Canada will remain dwarfed by most US players, which are up to four times the size and another reason why Canadian carriers need the transition period, says Morrison. We're already way back in the starting blocks, because the US carriers already dominate.'
Source: Airline Business
