Paul Seidenman/CALGARY
As Air Canada and Canadian Airlines (CAI) face up to each other in what is becoming one of the hardest-fought airline takeover battles in recent years, shock waves from the clash have already penetrated further down the Canadian airline hierarchy. While the country's two major carriers are embroiled in a wider battle between the Star and oneworld alliances, the operational future of Canada's smaller airlines is in the balance.
For Canadian Regional Airlines (CRA), the future looks especially complicated. CRA is not merely Canada's largest regional airline: it is also the country's third largest commercial carrier behind Air Canada and CAI. As a subsidiary of the latter, its status would inevitably be complicated by a merger of the "big two".
Ottawa has already hinted that if a merger goes ahead it may take steps to encourage the expansion of regional operators to guarantee competition on domestic routes. While such a policy could present Calgary-based CRA with new opportunities, it is also possible that the regional carrier could be stripped of some routes or even separated from its parent and/or broken up.
CRA maintains that it could remain intact, and that investment firm Onex, spearheading one merger plan, has revealed no plans for a break-up. "As it stands today, that is all we know, based upon what Onex has told us," it says.
CRA has grown at an annual rate of 15-20% for the last four or five years, and in1998 realised revenues of more than C$500 million ($336 million), boarding more than 4 million passengers. That growth has come despite heavy competition and it continued this year with the airline carrying 11% more passengers, or 2.04 million people, in the first six months.
In east Canada, CRA competes with the Air Canada Connector regional airline family, while AirBC, an Air Canada regional affiliate, covers much of British Columbia. WestJet, a Calgary-based Boeing 737 low-cost operator, is also expanding over much of Canada, and is affecting yields in some markets.
With 435 daily departures, CRA's primary task is to provide feed to CAI at Vancouver, Calgary, Edmonton, Winnipeg, Toronto, Ottawa and Montreal. It is more of an origin and destination (O&D) - or point-to-point - carrier than a traditional feeder operation.
"Only about 22% of our traffic involves feed to the mainline carrier," says Bob Reding, CRA's president and chief executive since May 1998. "The other 78% is O&D, and of that amount 5% involves a connection from one of our flights to another." Vancouver, for example, is a leading hub and Pacific gateway for CAI, but CRA, with 92 daily operations at the city, is the dominant carrier there. "We have more flights than our major partner at every Canadian city that we both serve - with the exception of Toronto," Reding says. The strength of CRA's network is such that it is likely to become a vital element in any attempt to maintain competition within the Canadian airline sector.
Against this background of potential upheaval, CRA, which is nearly nine years old, plans a major fleet revamp and is due to decide within two years on a replacement for its Fokker F28 jets. The carrier has operated the F28 since 1995 and it flies the world's largest fleet of the Dutch-built twinjet, with 31 F28-1000s, and one F28-3000. Of the total fleet, CRA operates 29, and leases three to Inter-Canadien. CRA also operates 24 Bombardier de Havilland Dash 8 twin-turboprops, consisting of 10 37-seat Series 100 models and 14 50-seat Series 300s.
"The F28 is a flexible, low-cost aircraft - operationally - especially on the comparatively short hauls that we fly," says Reding. "Because of their size, they enable us to react to market changes without adding a lot of excess capacity. There isn't a current production regional jet that can offer us the advantages of the F28."
Reding, an air transport-rated pilot, came to CRA from a similar position with Reno Air, the US-based jet carrier acquired late last year by American Airlines. The F28's advantages include a cabin wide enough to accommodate a business-class section, which CRA developed under a supplemental-type certificate from Transport Canada.
"As the only operator of the aircraft in a dual-class configuration, we fly our F28s in a 55-passenger layout, with 10 in business class," he remarks. Installing business class gave CAI's business passengers a seamless transition to and from the jets of its regional partner.
Aggressive maintenance
CRA mainly uses the F28 on stage lengths that average 1h 17min, although the longest trip now is the 2h cross-border run between Ottawa and Raleigh-Durham, North Carolina. The jets handle CRA's flights east of Winnipeg.
Most of CRA's F28s were built in 1973-4, giving the fleet an average age of 25-26 years. The average hours and cycles of the aircraft were 42,000 and 46,000, respectively, as of late June. Thanks to aggressive preventive maintenance, the carrier's F28s have averaged a 97.5% mechanical dispatch rate for the past 12 months.
"We are planning to phase out the F28s within the next five to seven years, which means we will have to put in an order for some type of replacement aircraft within the next two to three years," says Reding. "As reliable as it is, the F28 is an older, out-of-production aircraft, which means it is getting harder to find parts. Even though Fokker Services is still in business [under ownership of the Stork Group in the Netherlands] and is doing a good job of supporting the aircraft, since the manufacturer is no longer in business, that puts us at a disadvantage for parts support and service."
Noise is another F28 problem, Reding says. "Although the F28 is under 70,000lb [31,780kg] maximum take-off weight, which excludes it from Stage 3 noise rules, the twin Rolls-Royce Spey engines are older technology and not the world's quietest.
"We are very sensitive-because we want to be good neighbours. We have voluntarily limited late-night jet operations at Toronto and Vancouver because of the noise factor."
The $3-4 million cost per aircraft of hushkitting their engines is prohibitive, Reding says, adding: "I'd rather put that kind of money toward something new."
"If we decide that a business-class cabin is our primary requirement, then I would have to say that the Fairchild Aerospace 728JET is a leading candidate, because it has a wide enough cabin to accommodate a business-class configuration. Also, Fairchild appears to be in a position to offer good product support in North America. But we also know there are a lot of exciting developments happening with regional jets, and we are actively looking at other products from Bombardier and Embraer at the same time." CRA would also like its F28 replacement to have a 2,775km (1,500nm) range as opposed to the F28's 2,220km.
The choice must also take into account the scope clause in parent Canadian Airlines International's contract with its pilots, who are represented by the Air Line Pilots Association (ALPA). "Other than the mainline carrier, no Canadian airline operating under the CP code can fly aircraft which exceed 69 seats," Reding says. "That will limit the size of whatever aircraft we select."
Although market pressure is increasing on turboprop operators to move to jets, Reding's fleet planning remains focused on the F28s, and does not include its young Dash 8 fleet - at least for now. "On stage lengths of under 460km, the Dash 8 does very well," he says. "They are used to serving the smaller interior communities we fly to - particularly those in some of the more mountainous areas of British Columbia. This is why we have kept the Dash 8s west of Winnipeg, with flying east of that city handled exclusively by the jets."
Reding says "there is no question" that the airline will consider phasing out turboprops in favour of regional jets.
"But when we look at the markets we serve with our turboprops, and what is available, the Dash 8 continues to be the most profitable aircraft," he says. "If we are going to replace the Dash 8 with a jet, that jet will have to be a clear winner with respect to operating costs and efficiency. Also, there has to be a very strong demand from our customers to replace our turboprops with jets on short-haul routes."
Because the Dash 8 routes average only between 43min and 64min, Reding points out that jets would not shorten flights. "But we also know what the trends are in the USA [towards turboprop replacements with jets] and we are keeping our eyes and ears open," he says.
Much of CRA's huge O & D business involves providing additional frequencies for the CAI system through supplemental flying. That, says Reding, is among the more important reasons for maintaining a jet operation with a dual-class service. Within Canada, the F28s are among the CAI system's most important assets in the two all-important and distinct business markets: Vancouver, Calgary and Edmonton in the West, and Toronto, Montreal, and Ottawa in the east.
Although firmly entrenched in the Canadian business markets, CRA is still feeling its way among cross-border markets. That activity is limited to non-stop flights to Raleigh-Durham from Ottawa and Toronto, as well as daily service between Toronto and Boston.
All of CRA's cross-border trips represent solid business markets. Where it has been less successful is the more leisure-oriented US markets. Last year, for instance, a Vancouver-San Jose, California, run was dropped due to disappointing revenues. A Vancouver-Las Vegas service was also discontinued due to low-yield tourist traffic - and because it taxed the range capability of the F28s. The carrier also dropped its Vancouver-Portland and Vancouver-Seattle trips, flown with Dash 8s, in part because of a codeshare agreement with the Alaska Airlines/Horizon Air system.
Reding says CRA continues to evaluate cross-border routes that would be suitable for the F28s. "We believe some of those markets could develop to the point where our major partner could fly them with a 737. The F28 has proven to be a lower risk route development aircraft."
CRA's route structure, which encompasses near-sea level and congested urban airports, as well as remote, mountainous landing strips, requires that pilots be recruited and trained with this challenging and diverse flying experience in mind. "We require a minimum of 1,500h of flight time, and at least 500h of turbine time. But the majority of our new-hire pilots come in with an average of 2,500h of total aircraft time," says Steve Hankirk, flight operations director.
New-hire pilots who have what Hankirk calls a "high amount of quality turbine time" are hired directly into the F-28s. "They are the ones with extensive experience in an air transport environment operating turbine aircraft, mainly from what we call 'third-tier carriers'," he says. "In Canada, these are the smaller regionals, operating turboprop aircraft in the 19-seat range in small, remote markets."
Ground school for both the Dash 8 and F28 pilots is held in Calgary. The F28's simulator training is administered at CAI's training facility in Toronto using CRA's own instructor pilots. For Dash 8 pilots, simulator training is at FlightSafety International in Toronto, again using CRA instructors.
"The average number of hours for pilots we have hired has dropped to around 2,500-3,500h - down from as much as 6,000-7,000h," says Mike Lohmann, CRA's director of flight training and standards. "To address this, we have added a day of EFIS [electronic flight instrument system] and CPT [cockpit procedures training] instruction to the Dash 8 training, plus one no-motion day in the simulator. For the F28, we have added an extra day of ground school, with a full day of CPT training, and one full motion day in the simulator." He adds: "We are also considering a Wicat computer-based low visibility Category II interactive training system." A decision is expected soon.
Extreme weather
A major concern for CRA are the extremes of weather and terrain which the aircraft faces all year round. "We have brought all of those factors to the forefront of our training programme," says Lohmann. "As an example, on approaches, our pilots must make temperature corrections with respect to the information they receive from the instruments when the temperature is zero celsius or less. Rather than require our pilots to do the math, we have designed all of our approach plates to show the pilot what given temperature corrections should be made at all of the airports we serve."
Lohmann adds that training also emphasises landings on contaminated runways - those with ice and snow cover - especially under strong crosswinds. "Then, during the summer, the problems shift to thunderstorms and wind-shear," he says.
CRA is conducting third-party training for other carriers. It has trained F28 pilots for Air Namibia, which may send CRA pilots to the southwest African carrier to supervise line instruction. Lohmann says that several Latin American F28 operators are also in discussions with CRA on training.
"We are also in discussions with [Innsbruck-based] Tyrolean Airways about setting up an ab initio training programme for their pilots," he notes. "If we do this, they would send us pilots with about 250h and we would train them as first officers on the Dash 8. That would commence in the fall of 2000."
Lohmann says that since May, some of Canadian Regional's own pilots have been on loan to the Austrian regional for an average of six months each to round out Tyrolean's staffing needs. By the end of August, 12 CRA Dash 8 pilots had been trained for Tyrolean's operational procedures.
Source: Flight International
