DAVID KNIBB SEATTLE
After several false starts, Air Canada is limbering up to launch its discount carrier, and in the process invade the traditional turf of low-cost WestJet in western Canada.
WestJet has retaliated with new flights into the east, Air Canada's traditional stronghold. As more routes overlap and the carriers increasingly target the low-fare market, competition between them is bound to intensify.
Despite deepening losses, Air Canada is pushing ahead with plans to launch its new airline from a Vancouver base to compete directly with WestJet. Jetz and Zip have been mooted as names for the low-cost unit which has become known in the industry as "Air Canada Lite". Stephen Smith, who was WestJet's president until a year ago, is set to head the new airline. The Canadian flag carrier is reassigning 105 pilots to it, with plans to start with 10 Boeing 737-200s, doubling the number next year.
After some false starts, Air Canada is coy about exactly when the budget carrier will launch - "later this year" is its most precise estimate. Conditions for the launch of a new airline worsen, however, with the approach of winter, during which Canadian aviation typically goes into hibernation.
In what may be an ill omen for its discount arm, the Canadian carrier recently delayed until next year the merger of its regional carriers, which had been set for 24 September.
But Air Canada is already making a push in the west, having added flights and cut fares to serve notice of its market intentions. Although the flag carrier cannot match WestJet's unit costs, it expects to make up the difference through economies of scale, and to woo passengers with its network and frequent-flyer programme.
WestJet has responded by expanding its eastern Canada hub in Hamilton. It is adding one new route in December and boosting frequencies on others as it takes delivery of new Boeing 737-700s.
Clive Beddoe, WestJet's chief executive, predicts 50% more capacity by the end of this year compared with a year ago, and another 40-45% next year.
The rivals are already facing off in court. The competition tribunal has launched a case stemming from earlier WestJet complaints about Air Canada's fares. The case has become the forum for a battle over what constitutes predatory conduct under Canada's aviation law.
WestJet's contempt for the Canada flag-carrier's foray into the low-cost market, coupled with its official complaints about Air Canada's low fares, has prompted Calin Rovinescu, Air Canada's vice-president of strategy, to accuse his rival of doublespeak.
Source: Airline Business
