Neha Jain: http://canadaaviationnews.blogspot.com/ m 13

1. Air Canada flights to, from Tokyo resume
Air Canada flights to and from Tokyo have resumed following the historic earthquake which has rocked Japan, with the first inbound passengers landing in Vancouver on Saturday.

The 8.9-magnitude temblor and its dozens of aftershocks forced officials to close Tokyo’s Narita Inernational Airport, which had been transformed into a temporary shelter.

Airport security and staff there provided bedding and food for reportedly more than 1,000 landlocked refugees who slept in terminals and hallways while global airline services, including Air Canada, struggled to reschedule flights for thousands more fliers.

Air Canada offers daily transport to and from Narita, Tokyo, out of Toronto and Vancouver.

Calgary flights to and from Tokyo currently make a stop in Vancouver.

The first inbound flight was scheduled to land at Vancouver International Airport just before 2 p.m. Saturday with a Toronto flight slated to arrive Sunday.

A spokesman said the airline is waiving fees to facilitate changes customers are making for travel plans in light of the devastation.

“As you can imagine there are passengers who are choosing to delay travel, make alternate plans,” said John Reber.

Air Canada flights to the region are still tentative this week. Travel alerts have been issued for all Air Canada flights up to and including Friday.

2. American Airlines again bumps up airfares

American made the price change Wednesday. It also raised round-trip fares to Canada and Hawaii by $20.
It's uncertain whether other major airlines will follow American's lead going into the weekend. Carriers have been boosting fares in lockstep this year to try to keep pace with the rising cost of jet fuel. Occasionally, a price increase has been abandoned when other carriers haven't matched.
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Most recent fare increases have stuck, however, and the rapidly rising cost of airline tickets mirrors 2008, the last time oil prices soared above $100 a barrel, says Rick Seaney of FareCompare.com, who closely monitors ticket prices.
"Airlines who finally started making a profit late last year have little choice but to pass on fuel costs to consumers in the short term," says Seaney, who expects airlines to try to boost fares weekly through April.
Demand for air travel is high, airline analysts say, as more corporate fliers return to the skies and leisure travelers plan trips for spring break, spring holidays and summer vacation.
"Consumers have a higher threshold of pain for pricier tickets today as the economy recuperates than they did in March of 2008 as a global economic meltdown was afoot," Seaney says.
But Matthew Jacob, senior airline analyst at ITG Investment Research, says that while the rising cost of fuel may be making airlines more aggressive in raising prices, their goal is always to charge as much as they can for seats on their planes.
"It's not just because oil prices are high that they're focusing on getting the highest airfares they can," he says. "This is a business that has always had very dynamic pricing. You can book a flight now and pay a different price than someone who booked it yesterday and more than someone who books it tomorrow."
The same rising oil costs that are denting the airline industry could also force some people to put off travel and stay put.
"One thing that could be a speed bump to raising airfares further is if consumer travelers start to see their income pinched by ... higher gasoline prices," Jacob says. "Higher oil prices may make the airlines more aggressive, but fliers are not necessarily going to be willing to pay a higher airfare."

3. Porter 'pleased' with competition on island airport
Porter Airlines is brushing off concerns the impending return of Air Canada flights out of Toronto's island airport will force it out of business.

In fact the upstart airline, represented by a roguish raccoon, says it welcomes the competition. Porter will gain from the fees other airlines will be obliged to pay its parent company, Porter Aviation Holdings Inc., which owns the terminal building at Billy Bishop Toronto City Airport.

“We're actually pleased that other carriers are coming aboard now that Porter's made the airport viable for them to serve,” Porter president and CEO Robert Deluce said. “We're used to competing directly with Air Canada whether it's from Pearson, where they also serve the same market, or from other airports, Ottawa, Montreal and elsewhere, where our check-in counters are right next to theirs.”

Deluce said Porter also hopes to gain customers. Many Air Canada passengers have never flown out of Billy Bishop, he explained. Once those people are drawn into the executive-style lounge, with its comfortable leather chairs and cappuccino machines, they'll be persuaded to use Porter for flights to other destinations — such as Boston and Chicago — that Air Canada currently only services through Pearson.

“Chances are pretty good we'll converge some of those passengers over to loyal Porter fans along the way,” Deluce said.

Airline analyst Fred Lazar said Air Canada's arrival could be positive for Porter: “Air Canada will do well there and for Porter it's another source of revenues and increased exposure.”

But other industry experts aren't so confident Porter can compete.

“There is no question that Air Canada will try to eat Porter's lunch,” said Ramy Elitzur, an airline industry expert with the University of Toronto's Rotman School of Management. “Part of this is predatory with respect to competition, which is a legitimate reason.”

Air Canada has a history of loading up on certain routes and dropping prices to compete with smaller upstarts. It has been accused of driving several airlines out of business.

“It put CanJet out of business with that strategy, lowering prices below the level where CanJet could retaliate,” agreed analyst Joe D'Cruz. (CanJet stopped its scheduled service in 2006 but continues to fly as a charter airline.)

D'Cruz, a professor with University of Toronto, said discount carrier Jetsgo was facing similar price competition from Air Canada when it went out of business on March 11, 2005.

“There's a whole string of airlines which have failed because Air Canada retaliated with price,” said.

Regional carrier City Express operated flights to Ottawa, Montreal, and Newark, N.J., from Toronto's island airport in the '80s. From 1984 to 1990 it flew about 1.5 million passengers to and from the downtown core. At its peak it had 13 aircraft and a staff of 350.

But City Express eventually went under, filing for bankruptcy in 1991 — only a year after Air Canada's regional carrier, Air Ontario, began flying out of the island airport — due to heavy debt, unpaid federal taxes, rising fuel costs, a recession, and the success of its competitor.

The difference this time around is that Porter is a strong company, explained Lazar, an airline expert at York University. He added Air Canada has never been found to have violated competition laws.

“I don't think it's going to be negative,” he said. “(Air Canada) is not going to be able to undercut Porter's prices. They'll be able to match them but they won't be able to undercut them.”

He said four-year-old Porter is now a respected airline with a fleet of 20 aircraft, a solid business model and strong management. Free beer and wine on board doesn't hurt, although it's a service Air Canada plans to copy on its flights out of Billy Bishop.

“It's easy to claim that (Air Canada) was the cause of a Jetsgo or a Canada 3000 or even a CanJet dropping out of the market, but I think that economic conditions and some weak management with a poor business plan in the case of those airlines were much more responsible,” Lazar said.

Air Canada officials said they did not wish to comment yet on their strategy for the move to Billy Bishop.

Still, increased competition is bound to affect Porter, perhaps further delaying an initial public offering that was planned for June 2010, but put off due to what Deluce called, at the time, an unfavourable market.

“Investors are not going to be keen on investing in a company which is being attacked competitively by Air Canada,” said D'Cruz.

Porter's load factor for February was 50.6 per cent, up from 46.5 per cent in February 2010, and it recently launched a television advertising campaign. Information released during last June's IPO indicated a 50 per cent load factor would be the airline's break-even point, explained Lazar.

Air Canada begins service out of Billy Bishop May 1, with 15 daily non-stop return flights between downtown Toronto and Montreal's Trudeau International Airport. Porter currently runs 20 return flights per day between Toronto and Montreal.

The lowest Porter fare to Montreal is currently $149 one way, which becomes $455.90 for a round trip when fees and taxes are included. The cheapest Air Canada tickets, which went on sale March 7, come to $444.60 for the same route.

Air Canada flew out of the island airport until February 2006, when City Centre Aviation Ltd., owned by Deluce's holding company, terminated Jazz's month-to-month island lease. Porter began flying out of Toronto Island in October 2006.

Air Canada isn't the only airline coming to the island. U.S. carrier Continental Airlines was granted 16 slots out of Billy Bishop. It hasn't specified when it will begin flying from there, said Suzanna Birchwood of the Toronto Port Authority.

“Originally we were looking at an early summer start,” she said. “And we haven't heard anything (from Continental) since then.”

Continental told the Star its U.S. destinations for those Toronto Island flights are still not confirmed.

When asked if the arrival of Continental and Air Canada would open the door to even more airlines, and competition, at the island, Deluce said Billy Bishop's size will protect Porter from too much competition. His airline has 156 of the airport's 202 available slots.

“We have a whole bunch of destinations that we serve from here that no one else does,” said Deluce, including Ottawa, Quebec City, Moncton, Halifax, Sudbury, Windsor, Newark, Chicago and Boston. So far, Air Canada will only be flying to Montreal from Billy Bishop, but Elitzur said he expects to see Air Canada expand.

Western Canada's carrier will be the real loser when Air Canada begins flights from Billy Bishop Toronto City Airport, said analyst Fred Lazar.

“They're No. 3 in this market and with Air Canada opening up this space, they're going to become a much more distant No. 3 in the Eastern Canadian market,” he said.

“WestJet is not part of the mix, so they're going to lose the advantages of operating out of Billy Bishop,” said Ramy Elitzur of the University of Toronto's Rotman School of Management.

But the Calgary-based airline has plans to make up for some of those losses by expanding service on the Toronto-Ottawa and Toronto-Montreal routes, flying out of Pearson airport.

WestJet is bumping Toronto-Ottawa return flights to nine per week day, up from seven. And 10 flights will operate Monday to Friday on the Montreal route, up from eight.

“It's a multi-pronged approach,” said WestJet spokesman Robert Palmer. The airline is adjusting its flight times to fit better with business schedules, eliminating fees for changing flight times on the same day and serving free wine and beer on board.

When asked if Air Canada's new flights from Billy Bishop would take business away from WestJet, Palmer said: “We're not even in the mix.”

WestJet doesn't have appropriate aircraft to land at the island airport, he said. And Pearson is more convenient for many WestJet travellers who don't live or work in Toronto's downtown core.

By
Neha Jain

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