Robert Kokonis, President and Managing Director of AirTrav Inc., and Open Jaw aviation expert, talks with Financial Post about how the delta variant will affect the recovery of Canada’s air industry.
You can watch the interview in full here:
“The operative word… is upset,” Kokonis told the FP, saying that Canadian carriers had been optimistic about restored capacity by the end of the year.
“Everybody was feeling quite optimistic” from the national airlines to regional carriers, he said.
But they’re not watching the skies with rose-coloured glasses. Kokonis referred to ‘war rooms’ where airline executives are preparing for a much worse case scenario.
He says he expects airlines to “pare back some of that capacity” if the delta variant continues on its current course.
The delta variant will not just stifle the travel industry’s recovery, he said. In addition to affecting bookings and capacity, it could also have an impact on Canadians’ holiday plans later this year – and fares.
For Kokonis, the big question is, “What does it do to pricing?”
“Already looking at some bookings for domestic travel or international trips, the prices are relatively high, and that’s simply a function of supply and demand,” a situation he says could get worse.
“If the airlines are forced to take some of the capacity back off the store shelf, then I expect we’re going to see some kind of increase in pricing.
“For example, to London, England, before COVID, Air Canada had three or four daily flights, British Airways had two, WestJet one, Transat one or two, from Toronto… if the number of flights (drop to) one third of that, it does impact price, so that’s my concern. That some Canadians that need to travel, for example, around the holiday period, they may be in for some sticker shock.”
Kokonis also offered some other insights into the state of aviation in Canada:
On Porter’s Expansion
Kokonis says, “I like what I’m seeing from Porter, because it’s different.”
He points out Canada’s low-cost and ultra low-cost airline market is “getting crowded”, citing WestJet’s Swoop, Air Canada Rouge, Flair, as well as other, smaller regional airlines.
Porter, he says, is breaking that mould, with its jet order and expansion beyond Toronto Island’s Billy Bishop airport. “They’re going to focus, I think, a bit more on the leisure marketplace,” he told FP, but,“not the ultra low-cost marketplace.”
Instead of competing with low cost carriers, he says, Porter will be looking to capture business for pax looking for the value-add the carrier has become known for.
But he does say any expansion in the current climate is “fraught with risk.”
On WestJet Turning Down Federal Government Aid
Kokonis pointed out that the government’s COVID financial support packages to other airlines came with a lot of strings attached.
Unlike other carriers, “WestJet’s no longer a publicly-traded entity,” he reminded viewers. WestJet is now owned by Onex Corporation.
“So I think that WestJet and their primary shareholder looked at some of the conditions and thought they’d be pretty tough conditions to accept.”
In addition, instead of continuing to invest more time in negotiations, Kokonis said he thinks, “WestJet just finally decided ‘we need to get on with running the airline’.”
Ultimately, the fact that WestJet decided not to take on debt by accepting government aid, “is not a bad thing” in terms of its competitiveness with other airlines.
On the Cancellation of the Takeover of Transat by Air Canada
Without Air Canada as its “knight in shining armour,” Transat is believed to be looking for other investment dollars and he says the company, struggling even before the pandemic, will have to look hard at reorganizing its business.
Meanwhile, Air Canada, he pointed out, early in the pandemic got rid of some of its long haul, lower fare Rouge routes, which he says were likely designated to be replaced by Transat. Without the Transat deal, he believes Air Canada will be forced to rebuild those low-cost, longer haul routes.
On Business Travel Recovery
The aviation expert did say he was “bullish” about long-haul product in premium cabins.
“I think the bigger impact,” he told the FP, is going to be on frequent, short haul and domestic business travel, which he predicts will not stop outright, but will have much reduced frequency that could drastically reduce business flight expenditures.
“Short haul business travel will be the one that takes the longer term hit.”
