Air Canada Unphased By Virgin America's Canadian Plans
Open Jaw

By Bruce Parkinson

There have been several attempts by airlines over the years to establish non-stop service between Canada’s largest city and U.S. west coast capitals Los Angeles and San Francisco. Few have succeeded, including WestJet, which dropped the YYZ/LAX route less than two years ago. The next contestant is high-profile newbie Virgin America, which plans to make its first foray outside the U.S. beginning in June, with daily flights from both LAX and SFO to Toronto.

Air Canada Vice-President Global Sales Claude Morin says he believes others have failed on the routes mostly because his airline is ‘so well-entrenched.’

‘These are good routes. We fly them four times a day each and we wouldn’t if they didn’t pay. But I think our success makes it challenging for new entrants to come in,’ Morin told Open Jaw. The Air Canada VP says that the YYZ/LAX route is so strong that the airline is planning to use a wide-body featuring international J-Class service. ‘There’s that kind of demand,’ Morin says.

Asked if he thought the entrance of low-cost Virgin America would put downward fare pressure on the routes, Morin said he didn’t know, but assured that Air Canada would defend its dominant position. ‘We’re always very competitive. This industry is brutally competitive.’

Airline industry consultant and analyst Robert Kokonis says he believes Virgin America will drive down fares, resulting in benefits for leisure travellers and unmanaged corporate travellers. He says yields have not traditionally been strong on the routes, largely due to the length of the flights.

‘There’s lots of capacity through other cities, but non-stop flights can get away with a premium. There hasn’t been much competition on these routes and I think fares will certainly go down. And Air Canada will match them.’

Kokonis says it remains to be seen if Virgin America has ‘the special sauce’ required to make the routes work. ‘I’m interested to see these newcomers. They’re a young carrier with motivated staff that wants to please and an interesting in-flight product with satellite TV, power ports at every seat, mood lighting and touch screen meal ordering.’

Virgin America has ambitious growth plans that were stalled for two years in a ‘citizenship’ battle with U.S. regulators. The airline finally launched in August, 2007 and has struggled for profitability, like most other airlines. But Kokonis sees strong potential for Virgin America in the U.S. market.

‘Unless some U.S. majors start to show some real improvement in customer service and stop constantly adding new fees, carriers like Virgin America are going to have a real opportunity,’ he says.

Kokonis also sees a future tie-up between Virgin America and WestJet as a distinct possibility. The idea was floated by Virgin America CEO David Cush, who hammered out a codeshare deal with incoming WestJet boss Gregg Saretsky in their previous business lives at American Airlines and Alaska Airlines respectively. Such an arrangement might be a few years in the offing, but according to Kokonis, that’s when the two carriers ‘could represent some considerable competition for Air Canada.’

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