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Air Canada to launch low-cost carrier in 2013


Air Canada is pushing forward with its plans to launch a discount airline that will operate on routes to Europe and to sun destinations in the United States and the Caribbean.

“We think the low-cost carrier is a very very important initiative for Air Canada from different perspectives including growth and improving margins,” Air Canada’s chief financial officer Michael Rousseau told a CIBC institutional investors conference in Montreal on Wednesday.

He said that the airline, which is expected to announce some branding details of the proposed low-cost carrier within weeks, will launch operations next year.

It will focus on trans-Atlantic routes it does not currently fly to boost growth. On routes down south, the discount carrier will likely take over certain destinations Air Canada already flies that could be more profitable.

He acknowledged success depends on ensuring that they can have more seats in their planes, noting Air Canada’s 767 jets currently seat about 225 while low-cost carriers typically hold 275 seats, or 20 per cent more. Rousseau said it will be 100 per cent owned by Air Canada, with its own separate management team.

That comes in part because of an arbitration decision the airline won in July to settle a contract with its 3,000 pilots that will permit up to 50 planes including 20 Boeing 767s and 30 Airbus 319s to be used for the discount airline.

When contract talks with the Air Canada Pilots Association were stalled earlier this year, the airline had said it would look at alternative ways of starting a discount carrier including possibly through a partnership.

But the new contract with pilots is a critical win for the airline to go ahead on its own.

CEO Calin Rovinescu has repeatedly said the low-cost carrier is integral to the airline’s future success, noting that other legacy carriers like Air Canada have already launched in this market, especially in Asia.

Rousseau cautioned investors that it will take some time to ramp up this new carrier, noting it will be several years before all the aircraft would be in use.

“I think it’s a very exciting intiative, not just for Air Canada but for all our employees because it does provide growth opportunities,” he added.

thestar.com – Business