Canadian Airlines Plus - RootsAir strategies?

[I started this as a reply to "Amex sues Canadian" but it really doesn't belong there]

I think rootsair (or whoever actually launches a business-oriented airline) will offer (and promote) comp'ed equivalent status to AC and CP flyers from Prestige/Club up. If they launch in November, it would be through the end of 2002. Possibly SE and EP will not get the highest level, especially if roots is a Oneworld airline.

I would even (but I'm over-generous) give AC and CP elites lounge and priority check-in access with their AC or CP card when flying roots, just to give them a taste of rootsair. I might only do that for the duration of 2000, because they'll be making 2001 flying strategies then.

I don't think I'd hand out upgrades with the comp'ed memberships, but maybe even that would be worthwhile, something like the 4x500 that AA gave us as "Limited Gold". Enough to get them to take that first flight. And maybe another 4x500 after their first flight.

Obviously they'd get a LOT of people signing up just in case, but it's one relatively cheap way to get rootsair cards into wallets, and AA thought it worthwhile with the Limited Gold promotion.

Thoughts?

Thanks!
andrew


[This message has been edited by Andrew Webber (edited 06-14-2000).]

Twisting this topic a bit, if I were AMR, I would NOT accept RootsAir into Oneworld. With one more major public outcry, specially if the pilots goes on strike, the government of Canada may very well give cabotage rights to US/UK carriers. I don't think US based carriers would worry about Air Canada competing in the US domestic market. Air Canada may talk "big" right now about reciprical rights, but they wouldn't survive in that market. What red-blooded American would take a "Canadian" plane in the first place ?!?

Thanks for the responses. Would AA partner with Roots or a similar carrier, but outside oneworld? Would Roots take an approach like Alaska (wrt partnering, not maintenance) and codeshare with AA, but "partner" with multiple smaller (vs UA, AA) American carriers by way of reciprocal FF postings?

MD, I agree a foreign carrier would only want to serve three or four Canadian cities, which is always the argument against allowing it (they would skim the cream) but surely that's what _all_ the major competitors will do? Does WestJet serve any small centres, or plan to (I really don't know)?

AC*SE, I see your point. Presumably the way around that is to partner with someone like rootsair, even if not as part of oneworld, and let _them_ deal with Canadian regulatory hassles (and then neither airline has to conform to both at the same time!).

andrew

I see no way that this government extend cabotage rights to foreign carriers in the run up to an election which will very likely take place this fall.

The issue is way too controversial, and there is no public concensus on this. All of the carriers would bring out the nationalism guns--Roots won't want it, and the smaller operators certainly don't want it.

And frankly--don't be so sure that the American carriers want it. There are only certain routes that would generate enough traffic to interest a US carrier.

Timing is another issue. This is not a simple as decreeing, "You may now do this."

Cabotage can come about in two different ways. The first is cabotage from point to another point within Canada, the second is travel via an intermediate transborder point.

I see no way that the first will happen. Canadian law allows foreign carriers to operate international movement of goods and freight with limited regulation. But as soon as the movement becomes purely within Canada, the movement is subject to the entire scheme of Canadian law. (And vice versa for Canadian carriers in the US). Carriers will have to make many fundamental changes to parts of their equipment, their crew hiring, and their management within Canada if they are to operate pure cabotage.

Though the regulatory requirements on the airlines are easier, cabotage via a transborder point is just as complex. Off the top of my head, I can think of several dozen pieces of legislation that might be affected:

Aeronautics Act, Canada Agriculture Products Act, Canada Customs and Revenue Agency Act, Canada Labour Code, Canada Transportation Act, Canadian Human Rights Act, Canadian Transportation Accident Investigation and Safety Board Act, Carriage by Air Act, Customs Act, Federal Court Act, Immigration Act, Income Tax Act, North American Free Trade Implementation Act, Official Languages Act, Preclearance Act, Quarantine Act, Seized Property Management Act, State Immunity Act, Transportation of Dangerous Goods Act.

Way too much red tape to justify a few flights between Montreal, Toronto and Vancouver.

I agree that Roots has the best chance of survival if it becomes part of oneworld, but this membership is FAR from certain. Oneworld sets a fairly high standard, and its members tend to be larger international airlines. They have not gone with the regional strategy of Star, where the international airlines are complemented by smaller regional players. I also think that to get a reputation suitable for oneworld, you would have to have at least a few years of operation under your belt - startups won't cut it as they are too risky. The last thing oneworld wants is another failure in Canada.

As far as cabotage is concerned, IMHO any new airlines from outside would only serve the major markets in Canada and not the smaller centres, just like Roots Air stated goal.

I agree with AC*SE on the cabotage issue. And the U.S. would never go for it, because in spite of the free trade rhetoric, the American market is one of the most protected in the world, both regulatory and economic.

If AC (or any other Canadian carrier) were permitted to fly intra-U.S. routes, I am sure enough Americans would fly them, but only if AC could provide the frequency of scheduling needed to viably take on an AA or DL, or even STAR partner UA. But given the infrastructure needed to compete in the U.S. market, even a limited route system would require significant capital and marketing investment, dollars that would not quickly be made back. It would be like setting up a whole new carrier, not like adding a couple of more flights out of or in to Canada. Aside from the issue of buying gates at terminals, waging ruinous fare wars, etc.

And notwithstanding all the regs AC*SE has identified, he correctly notes that a U.S. carrier would only have two trunk routes of any interest or possible viability: YYZ-YVR and YYZ-YYC. Feeder traffic from YOW or YUL might not be a priority, but in any case would be expensive to maintain. A U.S. carrier would have less investment to make than a Canadian carrier would have to make in the U.S., but could the aircraft required be leased or redeployed to make it worthwhile? AC and the charters would keep prices low until the competition vanished. This is sensible business practice, not predatory pricing, so would be difficult to take to the Competition Commissioner.

And were this to happen in a strike situation, finding aircraft and crews to base in Canada would not be easy in a few days.

I believe we are a long way from seeing this happen, and the Canadian government is best to put its hopes in new starts and expansion of the charters. AA buying into CdnRegional is more likely to occur, but this too requires Ottawa to change ownership laws beyond what they feel might be acceptable to Canadians. (How much of a U.S. carrier can a foreign company own? I doubt it's more than 25%.)

West Jet does fly into at least some medium-sized centres (Grande Prairie, Saskatoon, Regina, Thunder Bay), so such routes must be profitable. But probably only on a no-frills carrier. I doubt there is the traffic to justify the cost of operating a full service airline, either American Canadian based, in smaller centres. Not only would they have to spread their airport costs across relatively few passengers, they would also be competing directly with Air Canada. West Jet has always insisted that it is going after a different market than Air Canada.

I could see some sort of code-sharing agreement being developed between AA and Roots Air, provided that Roots can convince AA that they can survive in the Canadian market. That might be hard, considering their start-up date is November. Start-up costs are high, and passenger loads are typically low between November and April, except for 2 weeks at Christmas.

Remeber Stu, Roots is a little different than many startups. Skyservice is an established charter carrier who are moving into the scheduled market. I think their challenge is a little more focussed that demonstrating simple, "survival."

Also, I think OW needs Roots more than Roots needs OW. Roots will have a strong advantage at the start, attracting people who are dissatisfied with AC, and are willing to take anyone else--especially any one else with a Frequent Flyer program.

On the market issue, the other point to remember is that every aircraft AA or UA or DL might put on Canadian services is one less aircraft that is available for their domestic operations. It's not just a question of where there are passengers, but where you can generate the most income for your equipment committment. Earning Canadian dollars for an airplane on which you are paying US dollar interest is a handicap.

I think if they could join up with OW, they will do quite well especially with the way that other OW carriers such as CX and AA trying to get as many CP FF on their side as possible lately.

I think Rootsair would need to have a FF similar or better than Aeroplan and allow current AC/CP FF to match their current level since this is the only way to get us to try out the new airline and those of us with status knows that we won't bother starting all over again.

One word of caution for them is not to go head to head with AC (matching flight for flight) like CP did which ultimately brought them to the current position. They will need to start slowly and try to take AC's customer away one by one...

Let's hope Rootsair becomes the next successful "CP" giving way to the return of more frequent seat sale, easier upgrades, lower fares, better service and much more benefits that we loss as a result of the merger... and most importantly COMPETITION..

Interesting discussions, folks. I agree that cabotage will only provide a limited amount of competition and then only on the routes between larger Canadian cities.

It sounds like RootsAir is going to provide us with some interesting times in the Canadian airline industry. A new Canadian partner for AA? Semi-affiliate of oneworld? Full-fledged competition for AC? Any of this will take time to establish.

But for now, there is only one major international airline based in our "home turf" and they have about 80% market share. What are we, as customers, going to do? Competition between AC and CP was cut-throat and ultimately costly, but they always kept each other on their toes with good service. Now in the quasi-monopoly situation, that kind of competition is gone. If we want competition, we must wait for the new startups to get established. In the meantime, we can only turn to foreign carriers for competition.

I'm thinking about going for the AA gold or platinum challenge. But I have to consider: AA is competition for AC, but it means some of the market share is lost to foreign interests. In the past, if I didn't like AC, I could walk over to CP and vice versa. I'd prefer not to give my business to a non-Canadian carrier, but again as a customer, who wouldn't try to cover their rear end when it comes to having status and recognition on another airline? I like oneworld and I like the prospect of perhaps making elite status (too bad it has to be on a foreign airline).

Interesting times lie ahead...

FewMiles..