Hurrah for Sir Richard Branson's plans to launch Toronto-London air service this June. Boo for his continuing campaign to start a domestic airline in this country.
Branson's Virgin Atlantic Airways will bring both pizzazz and price-competition to the transatlantic route. His hip, cheeky airline, known for in-flight massages and a near first-class product at business prices, will force both Air Canada and British Airways to try harder on Canada's busiest transatlantic route.
But Canadians should be cautious of Branson's continuing efforts to lobby for air rights within the country. In town last week to launch the London service, he said he is still confident Ottawa will give him the green light for domestic flights.
Before making any decision, Transport Minister David Collenette should take a close look at Australia. Last year, authorities there let Branson launch Virgin Blue, a no-frills carrier designed to shake up Qantas and Ansett Australia, which operated a cozy duopoly on key routes linking Melbourne, Canberra, Sydney and Brisbane. A second no-frills service was also launched by Impulse Airlines, which is Australian-based.
But figures released this month by the Australian Bureau of Transport Economics show that reports of great consumer savings are largely a myth. Despite two new discount carriers, the lowest air fares fell by only 1.8 per cent last year. But the real shocker is that full economy fares, the ones paid by business travellers, actually went up by 14 per cent, partly because of a weakening Australian dollar and the introduction of a GST tax.
The report says that the continuing lack of cheap fares in Australia's eastern states holds out little hope to Western Australians for air fare bargains, if and when the no- frills carriers expand service to their areas.
If Virgin is allowed into Canada, it would likely compete only on the most highly- travelled routes where Canadian-based carriers already keep Air Canada's prices in check. Based on the Australian experience, the best result that could be expected would be slightly lower discount fares for those who book well in advance, providing they live in a major city. But even that could be balanced by much higher fares for those forced to fly at the last minute. People in Saskatoon, Prince George, Thunder Bay and St. John's, all cities unlikely to attract Virgins attention, would get no benefit at all.
Made-in-Canada solutions to the Air Canada monopoly are already emerging from such innovative carriers as WestJet, CanJet, Canada 3000/Royal Airlines, Air Transat and Roots Air. Lets see what the home team can do before we let in outsiders to scoop the cream off the coffee. Business travel falls as Roots enters market A recent survey showing that North American business travellers are still on the move despite rising travel costs was probably dated by the time it was released.
The Runzheimer International study of corporate and government organizations in Canada and the U.S., taken in late 2000, indicated a rise in both the number of business trips being taken and in the number of travellers. But today's newspapers tell another story.
Some examples: Air Canada cited a slowdown in business traffic earlier this month when it announced plans to adjust capacity (i.e. reduce flights or use smaller planes) to meet demand. Last week Northwest Airlines slashed flights, advertising and management salaries blaming a weakening U.S. economy and declining business travel. And United Airlines is trimming costs by $200-million (U.S.) because of a drop-off in business travel.
All of which must be scary for Toronto-based Roots Air, which started service Monday (with a missing plane and cancelled flights) as a niche carrier targeted mainly at the business and upscale leisure market. On its initial flights linking Toronto with Calgary and Vancouver, two-thirds of the seats are in Gold (business) and Silver (premium full-fare economy) cabins. The limited number of cheap seats in Bronze require advance booking and a Saturday night stay-over.
Despite a lucrative frequent-flier program and regular rates that already undercut Air Canada at all price levels, Roots Air has deemed it necessary to offer an unspecified number of its premium seats at bargain rates until April 30. Those deep discounts reduce round-trip Gold fares of $2,896 and Silver fares of $2,426 for Toronto-Vancouver to $999 and $799 respectively. Similar giveaways apply to Calgary. Some conditions apply.
Roots spokesman Brock Stewart says the fares are intended to introduce travellers to the new carrier, and that Roots is not concerned about launching amid a fall-off in business travel. Corporate travellers will be attracted by high service levels and by fares that undercut Air Canada at all levels, he says.