Interesting article

[Maverick]

‘Unsustainable’: Air Canada & WestJet On Canada’s ‘Inevitable’ Airline Consolidation

BYJAMES PEARSON

PUBLISHED 2 DAYS AGO

 

Do you agree with Air Canada and WestJet that consolidation is coming to Canada soon?

For years, Canada has been heavily dominated by two carriers, now obviously Air Canada and WestJet, together with many much smaller operators. But there are now also (U)LCCs: Lynx Air, Flair, Canada Jetlines, and WestJet's Swoop. They're shaking things up and – most significantly – have many aircraft on order.

Inevitably, the two incumbents – with clear vested interests – are highly skeptical and wary and spoke at Routes World of the inevitable market shakeup. They would say this as they'd benefit from less competition and the ability to increase prices where they compete to have stronger yields and to achieve better performance.

 

 

What does Air Canada say?

Speaking at Routes World, Air Canada's Alexandre Lefèvre, Managing Director of Network Planning, said:

"The market in Canada has changed a lot – there are many new players, all coming  big ambitions and many planes. Competition is very fierce, with everyone trying to find their place. Next year will be exciting."

Lefèvre said Lynx Air and Flair each have around 50 737 MAXs on order along with 15+ A320s with Canada Jetlines. WestJet also has 60+ new aircraft coming, although it's unclear how many are for growth rather than replacement. He added:

"By 2027-2028, a huge amount of new aircraft will arrive. Yes, the new entrants are well funded, but they won't sustain more than one winter.

Canada is a more mature market... you can't really grow each market like you can in Asia and Latin America. People already travel quite a lot. It's highly unsustainable and there will definitely be more consolidation in Canada."

 

What does WestJet say?

It isn't surprising that WestJet management believes the same. According to Frank Satusky, Director of Commercial Strategy:

"There are six or seven Canadian carriers with pretty big growth ambitions... nearly 200 aircraft coming in a few short years. It took us nearly thirty years to achieve a similar number [WestJet, WestJet Encore, and Swoop combined have around 169 aircraft]."

Analyzing schedules information from OAG for domestic Canada this month shows there are 4.9 million seats for sale, down by 12% over October 2019. That drop is despite more operators, although the nature of the carriers has changed. Satusky said:

"We're having a bit of a struggle getting the yield up... in particular in domestic markets, which is from two factors. One is the significant amount of ULCC capacity now, the other that business travel is definitely not where it once was."

Like Air Canada, Satusky believes that the higher competition will not last. "We will probably see consolidation next year."

 

 

Toronto-Calgary

Air Canada's Lefèvre pointed to this 1,675-mile (2,696km) route as a good illustration of the greater competition resulting in a less sustainable domestic market. "It has seen a lot of growth and now has six airlines on it."

It's true: it does. There is Air Canada, WestJet, Flair, Lynx Air, Air Transat, and Canada Jetlines. Between them, the market has 258,000 roundtrip seats for sale this month, up by 10% over October 2019, when there were 'only' four operators.

As winter approaches, time will tell what happens – both to this route and Canada's airlines generally.

 

‘Unsustainable’: Air Canada & WestJet On Canada’s ‘Inevitable’ Airline Consolidation (simpleflying.com)

[conehead]

Consolidation? I don't know about that, but I predict some of these airlines will disappear. We've all seen it before.

[Guest2]

8 minutes ago, conehead said:

Consolidation? I don't know about that, but I predict some of these airlines will disappear. We've all seen it before.

Canadian Pacific Air Lines - Wikipedia

Pacific Western Airlines - Wikipedia

Air Canada | The Canadian Encyclopedia

Just remember, CP who purchased WD, PWA who purchased Canadian and then ........etc

[Seeker]

31 minutes ago, conehead said:

Consolidation? I don't know about that, but I predict some of these airlines will disappear. We've all seen it before.

I agree.  Consolidation is a good solution when each company has a different regional strength or a different market strength.  In this case all the companies are the same and chasing the same market - none of them fill a blank in any of the other's operation so no reason to consolidate.  Whichever has the weakest financials and the weakest marketing - not going to be with us for long.

[Guest2]

8 minutes ago, Seeker said:

I agree.  Consolidation is a good solution when each company has a different regional strength or a different market strength.  In this case all the companies are the same and chasing the same market - none of them fill a blank in any of the other's operation so no reason to consolidate.  Whichever has the weakest financials and the weakest marketing - not going to be with us for long.

The weakest will perish, and the strongest will linger on, until the next wave hits.....  Almost a cry for re-regulation.  Hmmm

[Rich Pulman]

10 hours ago, Skeptic said:

The weakest will perish, and the strongest will linger on, until the next wave hits.....  Almost a cry for re-regulation.  Hmmm

If the strong survive and the weak fail then the market is working as it should and there’s no need to regulate it. Regulation only adds cost and consumers are clearly driven by (low) cost. The drive for cheap, cheap, cheap may leave some consumers holding worthless tickets when their airline of choice goes belly up, but that shouldn’t be a surprising consequence. Perhaps we should regulate thinking so people are prevented from making poor choices.

[Jaydee]

1 hour ago, Rich Pulman said:

Perhaps we should regulate thinking so people are prevented from making poor choices.

Perhaps? 

[Seeker]

2 hours ago, Rich Pulman said:

If the strong survive and the weak fail then the market is working as it should and there’s no need to regulate it. Regulation only adds cost and consumers are clearly driven by (low) cost. The drive for cheap, cheap, cheap may leave some consumers holding worthless tickets when their airline of choice goes belly up, but that shouldn’t be a surprising consequence. Perhaps we should regulate thinking so people are prevented from making poor choices.

Friends and family will sometimes ask about booking, and using, a low-cost carrier for a planned trip.  I explain that it's simply a lottery with unknown odds;  should they get lucky and there are no adverse weather conditions (at either end or anywhere in the system) co-incident with their trip and the airline hasn't experienced a mechanical issue with the single airplane scheduled for their trip that they may be able to save a significant amount of money.  OTOH, a weather event or mechanical event could result in a significant delay of up to a week during which time you will be responsible for meals, hotels, transportation back and forth to airport etc.  Generally, if you're going for an event (wedding, funeral, cruise ship departure) I feel it's not worth the risk.  If you're retired and just going on a random visit to family where +/- a week doesn't matter - roll the dice.

[Kip Powick]

1 hour ago, Seeker said:

If you're retired and just going on a random visit to family where +/- a week doesn't matter - roll the dice.

 

Retired.....where +/- a week doesn't matter  Time always matter to me... but then ...that's only me 

Retired.....I always book with a Legacy carrier. I want to be "there" at a specific time. 

Retired.....Discounts ??? I don't care about retired employee discounts or "mini" airlines.....I'm going on well established carrier.. (see PS below)

PS...Hopefully Sunwing fits in that catagory as I have 3 weeks of scuba booked down south  and flying with them as the major carrier I used to use in Canada has dropped that destination.

[Maverick]

42 minutes ago, Kip Powick said:

 

Retired.....where +/- a week doesn't matter  Time always matter to me... but then ...that's only me 

Retired.....I always book with a Legacy carrier. I want to be "there" at a specific time. 

Retired.....Discounts ??? I don't care about retired employee discounts or "mini" airlines.....I'm going on well established carrier.. (see PS below)

PS...Hopefully Sunwing fits in that catagory as I have 3 weeks of scuba booked down south  and flying with them as the major carrier I used to use in Canada has dropped that destination.

The Sunwing/WestJet deal is still on so you should be fine. 

FWIW, Sunwing is the only one of the ULCC's I would have flown on prior to the WestJet thing. I worked for them, they fix their equipment properly. Operationally they could be very challenging though...

[Seeker]

2 hours ago, Kip Powick said:

 

Retired.....where +/- a week doesn't matter  Time always matter to me... but then ...that's only me 

Retired.....I always book with a Legacy carrier. I want to be "there" at a specific time. 

 

Hah!  I knew someone would call me out on the "retired" bit.  Of course I didn't mean retired like you are retired Kip - I meant retired like my Mother.  This week, next week or the week after doesn't matter to her.