Transport Canada 2002 Aviation Forecast Workshop Canadas Airlines: Emerging Industry Structure or Ba

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Transport Canada 2002 Aviation Forecast
WorkshopCanadas Airlines Emerging Industry
Structure orBattle of the Airline Business
ModelsDecember 9, 2002Ottawa, Canada
Transportation Partners Strategic Aviation
Management Advisors
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Canadas Airline Operating Environment (1)

• Rapidly changing environment
• Post 9/11 security has impacted cost structures
  and operating processes for all stakeholders.
• Surcharge fatigue amongst consumers (especially
  short-haul segment).
• Low Cost Carriers (LCCs) continue to challenge
  Traditional Carriers (TCs).
• Transborder U.S. traffic still soft.
• Pressure from airports to open things up -
  Cabotage/Canada Only/Franchise carriers

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Canadas Airline Operating Environment (2)

• Rapidly Changing Uncertain Environment
• While Canadian carriers have done better than
  U.S. counterparts, operating environment is still
  volatile - threat of war in Iraq impact on fuel
  or another terrorist act or rumor could adversely
  affect traffic.
• Buyer behavior is changing rapidly because of
  internet forcing airlines to change how they
  distribute and price their product - fare
  simplification and access.
• Business traveler is coming back, but more price
  sensitive - this has impacted TCs more than LCCs.
• Carriers are responding altering managing
  practices and approaches to key strategic issues.

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Canadas Airline Industry Structure (1)

• Pre- Air Canada/Canadian Merger Dec. 1999
• Industry structure mainly a duopoly with Air
  Canada Canadian with their respective regionals
  serving domestic, US and international markets
  (traditional carriers)
• WestJet mainly a western regional carrier
• Duopoly supplemented by large charter carrier
  presence in domestic and international markets
  Air Transat, Canada 3000, Royal, and Skyservice

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Canadas Airline Industry Structure (2)

• Post-Air Canada/Canadian Merger Phase 1
• In 2000, several carriers expanded or entered
  market to fill market void left by Canadian
  Airlines Canada 3000 started change over from
  Charter to Sked Royal expanded domestic
  schedule Canjet entered market trying to emulate
  WestJet WestJet established hub at Hamilton
  with Ontario and New Brunswick points served.
• Air Transat and SkyService offered domestic and
  international charter services.
• A new wave of airline competition was taking hold.

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Canadas Airline Industry Structure (3)

• Post Air Canada/Canadian Merger Phase 2
• in 2001 Roots Air/SkyService entered and left
  premium domestic service niche within 6 weeks
• Canada 3000 acquired and merged Royal Aviation
  and Canjet
• Post September 9/11, Canada 3000 exits market
• Domestic Service left to AC and WestJet
• Air Transat and SkyService Charter Segment

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Canadas Airline Industry Structure (4)

• Post Air Canada/Canadian Merger Phase 3
• Air Canadas Multi Brand by segment strategy
• Air Canada Mainline TC in domestic, transborder,
  international segments.
• AC Tango no-frills domestic/transborder carrier.
• ZIP No Frills-low fare regional carrier.
• JAZZ Short Haul regional carrier domestic
  transborder.
• JETZ Sports Team/Special Charter carrier.
• Air Canada Vacations Tour Operator/charter arm
  of AC
• To come AC Elite Premium Business Carrier and a
  new Air Cargo Brand.

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Canadas Airline Industry Structure (6)

• Low Cost Carrier Segment
• WESTJET now a national low cost carrier, evolving
  as a mini hub and spoke and point-to-point
  carrier. WJ will likely enter transborder market
  in next 2 to 3 years.
• JETSGO Coast to Coast LCC, building presence in
  Toronto-Montreal, Toronto-Winnipeg segments to
  appeal to price sensitive business traveler.
• CANJET II - Regional LCC operating between
  Atlantic Canada and Ottawa, Montreal, Toronto.

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Canadas Airline Industry Structure (7)

• Charter Segment
• Conquest/SkyService introduce new domestic
  charter service. SkyService operating in
  domestic, tranborder and International Charter
  market
• Air Transat Vertically Integrated travel company
  operating in domestic/international markets, with
  some scheduled designations internationally.
• New Charter Start-ups (announced) include Air
  Columbus, HMY Airways. Others in planning stage
  include a new Canada 3000, and Canada West
  Airlines.

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Canadas Airline Industry Structure (8)

• Local/Regional Niche Carriers
• First Air, Canadian North, Air North, Calm Air,
  Air Inuit, Air Creebec.
• Numerous others Bearskin, Transwest, Central
  Mountain, Air Georgian, Air Labrador, Helijet
  etc.
• Potential new entrant Regional Airline Holdings
  at Toronto Island using Q400 Dash 8s.

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Canadas Airline Industry Structure (9)

• Air Cargo/Courier Segment
• Kelowna Flightcraft
• All Canada Express
• ICC
• CargoJet Canada
• Morningstar
• Knighthawk