Neha Jain: http://canadaaviationnews.blogspot.com/18

The days of cheap air travel in Canada may be drawing to a close.

1. Canadian airlines testing higher fares, analyst says
Despite arguments that high taxes and fees from Ottawa are behind higher fares in Canada, the country's largest airlines have also been testing the upper limits of what consumers are willing to pay to fly, according to one analyst.

And while it is still too early to say for certain, the days of cheap travel in Canada may be drawing to a close, Raymond James analyst Ben Cherniavsky, said in a note to clients Wednesday.

The highlight of the fourth quarter for both WestJet Airlines Ltd. and Air Canada were the pricing improvements they experienced in the final three months of the year.

WestJet, for instance, said its yields, reflecting higher prices, rose 6.8% during the quarter, and Air Canada's were up by 5.3% in the domestic market as well.

These small increases have incredible impact on the profitability of the airlines. Mr. Cherniavsky noted that WestJet's fourth-quarter earnings per share of 33¢ doubled his earnings estimates simply because its yield of 17.6¢ was only slightly more than his estimate of 16.8¢.

Mr. Cherniavsky said his random sampling of fares shows that the country's largest carriers are still trying to find the upper threshold where fare increases impact demand.

"We do not know where demand destruction ultimately kicks in (nobody does), but it is obvious that at some point consumers and (less so) businesses will eventually balk at price increases and just stay put," Mr. Cherniavsky said.

Mr. Cherniavsky said his February fare index was up 34% and 46% for Air Canada and WestJet respectively, marking the "highest absolute value" he has has recorded in February in the eight years since he started doing these surveys.

Mr. Cherniavsky said the index has proven useful in the past in determining the direction of pricing trends.

"While it may be a stretch to suggest that this marks the end of cheap travel per se, it appears increasingly evident to us that, after more than a decade of waiting (effectively ever since Canadian failed), the elusive benefits of a 'cozy duopoly' in Canada's airline market may finally be at hand.

2. Porter Airlines expands Moncton service

Porter Airlines is expanding its service in Moncton and in April will begin offering a daily round-trip flight from here to Ottawa, continuing to Toronto.

ENLARGE PHOTO

GREG AGNEW/TIMES & TRANSRIPT
Porter Airlines is bolstering its schedule beginning April 13.
In the busy summer season, Canada's third-largest scheduled carrier will double its Moncton schedule, providing twice-daily round trips to the Ontario cities.

Currently, the airline offers four round-trip flights each week to Ottawa, continuing to Porter's downtown base at Billy Bishop Toronto City Airport.

Brad Cicero, spokesman for the airline, says Porter is in the process of acquiring two more Bombardier Q-400 turboprops, which is allowing them to expand service in certain markets.

Cicero says Atlantic Canada as a whole has been good for the airline, which also has flights to and from Halifax and St. John's.

"We've been able to get a lot of good support in the entire region as we've grown," he says.

Porter announced its Moncton plans yesterday, in addition to plans to bolster its Montreal-Halifax service and St. John's-Montreal service, which connects in Halifax. Additional flights between Toronto and Ottawa were also announced.

The new schedule begins April 13.

The twice-daily summer schedule on the Moncton-Ottawa-Toronto route begins June 27.

Rob Robichaud, president and CEO of the Greater Moncton International Airport, says the additional flights in and out of Moncton provide "tremendous flexibility" to Metro Moncton and to the province.

"It clearly cements Porter's service within New Brunswick," he says.

"It provides our community with daily service - you no longer have to worry about when you get back and forth from Toronto Island; you now can plan your meetings and know that you're going to get back the next day."

Robichaud "hopes it's the beginning of something even bigger down the road," for the airport and Porter.

Kevin Silliker, director of business and tourism development with the City of Moncton, says the city also hopes Porter adds additional flights from Moncton to other destinations in the future.

"The more connections that we have, the more opportunities abound in meeting and convention markets," Silliker says. "It's all about moving people in and out of your centre, and having additional flights really aids our business model as far as promoting Moncton as a meetings and convention destination."

Cicero says there are no other new flights or plans to announce at this time.

"We'll take it step by step," he says. "We're kind of restricted in terms of aircraft availability, so we want to make sure that we're supporting the markets that we're in, at the same time growing a little bit beyond that as time goes on."

In addition to providing businesspeople in Metro with direct flights to our nation's capital and to the hub of the Canadian business world, connectivity is key when it comes to landing major events in Moncton, Silliker explains.

He uses Moncton's successful hosting of the IAAF World Junior Championships last summer and its bid to host the 2015 FIFA Women's World Cup as examples.

"All of these things, when you submit proposals, they ask about connectivity and being able to move participants or media or event-goers in and out of your city centre."

He says that the Greater Moncton International Airport is a big asset the city leverages regularly in trying to attract business and events.

Silliker notes that with more airlines and options available to consumers, they also benefit from increased competition.

Porter Airlines has captured a niche in the Canadian airline market, offering comfortable airport lounges, free in-flight wine, beer and premium snacks aboard modern turboprop aircraft that cruise at speeds comparable with jets.
3. Canadians drive to US for cheaper airline tickets

An increasing number of Canadians are driving to the United States to take advantage of cheaper airline tickets says data released from the Hotel Association of Canada (HAC) 2011 Canadian Travel Intentions survey.

Twenty-one per cent of leisure travelers said they traveled by car to a US airport last year to take a trip using less expensive airline tickets purchased for US or foreign travel, and an additional 11% said although they had not done so in the past, they might this year. This is up from 18% in 2010.

“This has the potential for almost one third of Canadian travelers spending money on foreign airline tickets and taking flights outside of Canada. The dollar at par and high costs for Canadian airports and travel mean that Canadian air carriers are at a distinct disadvantage and cannot offer the prices to match those in the United States,” said HAC president Tony Pollard. “This growing trend has serious consequences for the Canadian travel industry and needs to be addressed by the reduction of airport fees, travel security costs and airline surcharges.”

The survey also revealed that 83% of leisure travelers said they will be traveling in 2011, up from 78% in 2010. Seventy-six per cent of business travellers said they will be traveling this year, a figure consistent with 2010. However, in Ontario business travel will be up 5% year over year.

Seventy-three per cent of leisure and 86% of business travelers also say they use the Internet to gather information before they book travel. “The top five things travelers are looking for on the Internet are special travel offerings, photos, maps, accommodation ratings and amenities,” said Pollard. “The number of travelers reading testimonials from other travellers, consulting blogs and writing about hotels on Twitter and Facebook is also increasing.”

4. Aviation industry needs to boost wages to address looming job shortage: ICAO
MONTREAL - Air carriers needs to improve wages and benefits in order to help regain the lost appeal of an industry facing a historic shortage of skilled professionals, the head of the UN civial aviation agency said on Thursday.

A wave of retiring baby boomers and skyrocketing demand in emerging markets are creating shortages — particularly of pilots, controllers and mechanics, said Raymond Benjamin, secretary general of the International Civil Aviation Organization.

Being a flight attendant or pilot no longer has the appeal that it did decades ago, he said Thursday in Montreal after speaking to the French Chamber of Commerce in Canada.

"It's no longer the glamourous era of pilots with nice uniforms. (Now) they are people who often have second jobs."

A recent ICAO study said that 560,000 people will need to be trained over the next 20 years, including 360,000 maintenance workers, 160,000 pilots and 40,000 aircraft controllers.

Strong aviation growth in some parts of the world is also accentuating the problem because they offer large incentives to attract workers to relocate.

"There are some places where demand is so strong that they suck up all the graduates of other countries," Benjamin said.

The comments come as Air Canada (TSX:AC.B) has begun contract negotiations with its workers. Its various unions are seeking large wage increases to partially recover for years of few gains caused by the airline's weak financial position.

Low wages also contribute to pilot fatigue if they take several jobs to make ends meet. Although some pilots for large planes at major airlines can earn well over, $100,000 a year, that's not the case for pilots at small regional airlines.

The co-pilot of a deadly 2009 crash nearly Buffalo, N.Y. took a cross-country red-eye flight the night before to get to her $23 an hour or US$16,000 a-year job. Rebecca Shaw, 24, previously had a second job working in a coffee shop. The average salary for Colgan Air pilots was around US$55,000.

Benjamin said ICAO has created a working group to develop new standards and procedures to address a problem has caused numerous accidents and fatalities.

Recommendations to government could include reducing the number of hours in flight or lengthen the intervening rest times.

NEHA JAIN

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