Air Canada expects to double its transborder service to the US within the next three years and in recent months has added new flights to Israel, India, Japan and Korea, and announced plans to begin service to Hong Kong, Belgium and Spain. 'We're adding capacity faster than the market can grow to try to take market share away [from competitors],' says Paul Brotto, Air Canada's controller and vice president, financial planning.
The result was a capacity increase of 12.2 per cent in 1994 and Brotto believes this will be up 12 per cent this year and 11 per cent next year. However, these figures have been supported in part by growth in available seat miles per employee - 10.5 per cent last year for an increase in average employee numbers of only 1 per cent.
Air Canada is taking delivery of 19 new aircraft this year and at least 12 in 1996, 27 in 1997 and 10 in 1998. It will replace 35 DC-9s in its fleet with 35 A319s, three L.1011s with five 767-300s, and six 747s with six A340s. The carrier will also add a total of 24 Bombardier 50-seater Regional Jets by next August.
'From our perspective, we already had the highest load factor in North America, so there were no opportunities there,' says Brotto. 'In the short term, we've sacrificed load factor and yield to grow our system to the point where we can cover the opportunities from open skies [between the US and Canada], in the Pacific and the Atlantic. If we don't improve our load factor and yield, we have to keep all our focus on the cost side.'
Productivity gains have been achieved largely by a benchmarking programme that measures the carrier's operating costs against those of major US and European airlines, and by a company-wide effort to improve labour productivity, says Brotto. Labour costs represent between 26 and 27 per cent of Air Canada's total operating expenses.
In 1993, Air Canada's pilots flew an average of 43 hours per month, compared to up to 60 hours at major US airlines. Revising bidding rules through a new pilot contract that now requires fewer reserve crews, and adopting new scheduling software last year, enabled Air Canada to increase its pilots' flying time to 51 hours per month. This year it will climb to 55 hours. The new bidding system has increased pilot productivity by 4 per cent, while the software boosted it 5 per cent.
The carrier, which presently has eight aircraft types in its fleet, is working to reduce this to four. Brotto says this will favourably affect Air Canada's cost picture in various ways. First, fewer types means less crew training and fewer reserve crews: on the A320 and planned A319 fleet for example, this will increase pilot productivity by 3-4 per cent. Brotto estimates fleet simplification could also boost the productivity of the carrier's mechanics by 20 per cent between 1996-98.
Management recently started working with the mechanics to establish several pilot projects at Montreal/Dorval airport to develop maintenance procedures that will improve productivity and reduce waste. Brotto hopes these efforts will be expanded to other maintenance facilities throughout the carrier's system.
Meanwhile, flight attendant productivity was boosted from 1993 when the carrier began adjusting staffing levels according to load and meal service requirements, increasing this group's productivity 10 per cent last year. In 1994, it launched a software optimisation program to schedule flight attendants which has boosted their productivity another 5 per cent.
Air Canada has also been adding flights at its hubs without adding more ground staff. At the same time, flight turnaround times have been reduced by between five and 15 minutes per flight since 1992, says Brotto, adding that this has 'contributed significantly to aircraft utilisation and productivity.' Aircraft productivity was up 8 per cent last year, and is expected to climb 3 per cent this year.
The airline has also slashed management and clerical staff costs, cutting these groups by 50 per cent since the early 1990s. It currently employs 19,000 people, including 1,300 pilots, 3,000 mechanics, 3,000 flight attendants and 2,500 management and clerical staff.
Fuel costs make up 15-20 per cent of Air Canada's operating expenses, and last year the airline embarked on a fuel-hedging programme, which increased fuel efficiencies by 2-3 per cent. A new flight-planning system will save a further 1.5 per cent fuel burn, Brotto says.
Air Canada can increase productivity further by redesigning and reengineering work processes in maintenance, adopting self-service measures for ticketing and airport check-in. It is to launch electronic ticketing purchased from United, with which it codeshares, soon.
Source: Airline Business
