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Air Canada to merge vacation business with new discount airline

Passengers wait in line for an Air Canada flight at Toronto's Pearson airport, March 18, 2012.

J.P. Moczulski/The Globe and Mail

Air Canada is combining its vacation travel business with the discount airline it will launch next year, and has named a veteran of the leisure travel industry to lead the new venture.

Like the build-up to a Hollywood release or show-biz awards show, Air Canada continues to release teasers about its new discount leisure group and airline, now set to begin flying in June, 2013.

Air Canada Vacations already competes with other combined tour-airline companies such WestJet Vacations and Transat Holidays for leisure travellers.

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Aligning Air Canada Vacations with the new discount carrier is seen as making those Air Canada's routes more appealing to vacationers.

"Air Canada will be able to compete more effectively in this highly dynamic and expanding market," Calin Rovinescu, Air Canada's president and chief executive officer, said in a statement Tuesday.

The discount airline will serve vacation destinations, such as the Caribbean and Europe, which are less profitable for the main fleet.

It will also fly to new spots not currently served by Air Canada, the carrier announced Tuesday.

Air Canada executives have emphasized recently that the new leisure group will have a distinct corporate identity from the main airline, more in tune to the discount travel industry.

Michael Friisdahl, former chief executive officer of travel operator Thomas Cook North America who has spent more than 25 years in the industry, as been named president and chief executive of Air Canada's new venture.

The leisure group will be wholly owned by Air Canada, and Mr. Friisdahl will report to Air Canada's executive vice-president and chief commercial officer Ben Smith, the company said in a statement. Mr. Friisdahl was not available for comment Tuesday.

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The current head of Air Canada Vacations, Zeina Gedeon, has been shifted to vice-president of e-commerce, product distribution and sales development, largely in charge of Air Canada's online presence.

Industry observers see this as a move by Air Canada to create a discount group more in line with other vacation companies.

"A lot of the destinations that the low-cost carrier will operate to, Air Canada already operates today. But because they are in markets such as various sun destinations, or let's say Amsterdam or Athens, they have to be price competitive because of all of the other competitors there," said Robert Kokonis, managing director of airline and travel consulting firm AirTrav in Toronto.

Most of these destinations have relatively fewer business fliers paying full price, with flights instead full of vacationers and the so-called VFR segment (visiting friends and relatives).

"So for as long as Air Canada has a presence through its low-cost carrier in these leisure markets, where revenue yields are not that great and they have to be cost competitive, it makes total sense that Air Canada Vacations is part of that offering," Mr. Kokonis added.

The new carrier's flight schedule will be released along with the unveiling of the leisure group's branding in the coming days. Yet, as another teaser, Air Canada did say Tuesday that the carrier will begin flying with two Boeing 767-300ERs and smaller Airbus A319s from the main Air Canada fleet.

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As routes are shifted to the discount carrier, and as the main fleet adds new Boeing 787s in 2014, the discount carrier is expected to ramp up to about 50 planes in total (including 20 767s, and 30 A319s).

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About the Author

Guy Dixon is a feature writer for The Globe and Mail. More

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