April 1, 2003, Air Canada's business model died, 17m later..

Join this forum to discuss the latest news that happened in the world of commercial aviation.

Moderator: Latest news team

Post Reply
SN30952
Posts: 7128
Joined: 31 Jul 2003, 00:00

April 1, 2003, Air Canada's business model died, 17m later..

Post by SN30952 »

April 1, 2003 - the day Air Canada's business model died, now 17 months later.

"The business model is broken and it must be fixed without burning any more furniture," Air Canada chief executive, Robert Milton told.
Air Canada filed then for court-ordered bankruptcy protection.
Seventeen months later, he is now days away from leading the Montreal airline out of insolvency.
He did this by shedding close to 7,000 jobs, persuading workers to give up more than $1-billion in wages and benefits, and renegotiating new deals with suppliers and aircraft lessors for annual savings of another $1-billion. He also oversaw the creation of a new fare structure, and decided to retire older wide-body aircraft in favour of smaller, more fuel-efficient regional jets. And, finally, he sold creditors on a plan that will see the airline's pre-filing debt plummet from $13-billion to $2.8-billion.
In return, debtholders will be stuck with roughly 7 cents to 10 cents per dollar owed, paid in stock in a revamped Air Canada.
The new Air Canada, Mr. Milton says, will rely much less on revenue from the domestic market and far more on routes to Europe, Asia and Latin America.
The eye on foreign markets is partly influenced by the success of discounters -- namely WestJet Airlines Ltd., Jetsgo and CanJet -- in taking away domestic market share.
Mr Milton adds Air Canada is also ready for what he believes is inevitable - namely, the entry of discount airlines into the transatlantic market.
Air Canada may look at establishing a stand-alone carrier that flies discounted, no-frills flights to so-called leisure destinations.
Qantas, Australia's major carrier, has such a unit in place in Australian Airlines, which flies to such destinations as Bali.
"You put more seats in the planes and offer less frills because those passengers are not willing to pay as much," Mr. Milton says. "I could see having a brand like that in time, as we start to regain momentum and grow the airline."
Air Canada placed a US$2.6-billion order late last year for 90 regional jets, split evenly between Canada's Bombardier Inc. and Brazil's Embraer. A good chunk of these jets will seat between 70 and 100 passengers. This incorporates a key part of Air Canada's strategy.

So what the low-cost carriers did to the big airlines with their Boeing 737-700s and Airbus 320s, we're now going to do with our Embraer 190s and Bombardier 705s says Milton.

One key advantage Air Canada has is unfettered access to international routes. Meanwhile, the U.S. carriers must fight among each other for rights to fly to a certain country.

Mr. Milton also says the U.S. industry has yet to make significant, customer-friendly changes, such as eliminating the required Saturday-night stayover and creating more transparent, easy-to-understand fare structures.
When it exits bankruptcy protection, Air Canada will operate as a subsidiary of a new holding company, to be called ACE Aviation Holdings Inc.

Read the full interview in © National Post 2004
http://www.canada.com/national/national ... 887&page=1

Post Reply