Air Canada will operate its planned low-cost airline as a wholly owned unit with its own management team, the company’s chief financial officer said on Wednesday.
Speaking at a CIBC investor conference in Montreal, Michael Rousseau said Air Canada would reveal more details of the ramp-up, including the branding, of the new discount carrier in the next couple of weeks.
Air Canada, Canada’s biggest airline, last month said it would start up a low-cost airline in 2013 to fly to holiday destinations in North America, the Caribbean and Europe, slowly ramping up over time to a 50-aircraft operation.
The loss-making carrier has touted a low-cost division as a way to cut its high costs and boost revenue and market share after years of stagnation.
Details about the structure of the new airline have been sparse, giving rise to speculation that Air Canada could bring in a foreign airline or financial player as a partner.
Air Canada has taken “a lot of time and energy” to study different low-cost models, which have exploded in the airline industry globally, and usually take the form of a wholly owned or partnership structure, Rousseau said. “The model will be 100 percent (owned), separate leadership,” he said. “It will have a separate management group because we want to ensure that we maintain the low-cost mentality.”
Repeating comments along the lines of those made by Air Canada Chief Executive Calin Rovinescu last month, Rousseau said it would take several years for the discount carrier to ramp up to 50 planes.
The new airline “will not have a material impact in 2013,” he said.
Some of Air Canada’s current flights to holiday destinations in the Caribbean and the United States will “flip” to the discount airline as they don’t make as much money inside the mainline carrier as Air Canada would like, Rousseau said.
Air Canada’s discount airline plan was a non-starter until late July when a federal arbitrator imposed a new labor agreement on its pilots. They had opposed the start-up, which will pay pilots less than they earn at the mainline carrier.