Air Canada bookings for US routes down by 10% from last year: CEO
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Air Canada CEO Interview Summary
Key Concepts:
- US-Canada relations impact on bookings
- Diversification of trade
- Fleet renewal delays (Airbus 321XLR, Boeing 787-10)
- China route recovery
- Impact of flying over Russia
- Government regulations and trade barriers
US-Canada Relations and Cross-Border Travel
- Booking Impact: Air Canada's bookings for US routes are down roughly 10% year-over-year, attributed to tensions between Ottawa and Washington.
- Leisure vs. Business: The 10% decrease primarily affects leisure travel (Florida, Las Vegas, Arizona, California), while business travel remains strong.
- Revenue Impact: The 10% booking decrease on US routes translates to approximately a 2% impact on Air Canada's overall revenues, as US routes constitute 22% of their total revenue.
- Traffic Shift: While air travel is only slightly affected, road traffic between Canada and the US is down significantly (40%), indicating a decrease in day trips and car vacations.
- Improvement: In recent weeks, cross-border flight bookings have shown signs of improvement, suggesting a potential easing of tensions.
- Alternative Destinations: Canadians who are hesitant to travel to the US are opting for domestic vacations or flights to Europe, Air Canada's other major markets.
- Government Influence: The new government in Ottawa, led by M. Carney, is perceived to be fostering a better relationship with the US government, which is viewed positively.
Government Policies and Trade Diversification
- M. Carney's Leadership: The new government aims to reduce regulations and red tape, which is beneficial for business growth.
- Trade Diversification: A key objective is to diversify trade away from the United States, as roughly three-quarters of Canada's exports currently go to the US.
- Intra-Canada Trade: The government also seeks to eliminate trade barriers between Canadian provinces.
- Air Canada Benefit: Reduced trade barriers within Canada and diversified international trade are expected to stimulate economic growth, benefiting Air Canada's expansion plans.
Fleet Renewal and Aircraft Delays
- Frustration with Delays: Air Canada is experiencing frustration with delays in aircraft deliveries from both Airbus and Boeing.
- Airbus A321XLR: The Airbus A321XLR, a crucial aircraft for Air Canada due to its range and versatility (Europe year-round, transcontinental routes), is almost two years late, with the first delivery expected in Q1 of next year.
- Boeing 787-10: Deliveries of the Boeing 787-10, ordered last year, are also facing delays, impacting the airline's international growth plans.
- Demand Exists: Despite the delays, the demand for new aircraft is present, indicating a strong market for Air Canada's expansion.
- Boeing's Challenges: Boeing is undergoing significant changes to address supply chain issues and improve production.
China Route Recovery
- Bilateral Agreement: Canada has a bilateral agreement with China that pre-pandemic allowed for approximately 76 flights per week.
- Current Restrictions: Currently, the number of flights is capped at 14 per week. Air Canada is operating 12 or 13 flights per week.
- Slower Than Expected: The recovery of the China route is progressing slower than anticipated.
- Market Potential: While the China market was strong pre-pandemic, its recovery is expected to mature at a different pace compared to other regions.
Impact of Flying Over Russia
- Inability to Fly Over Russia: The inability to fly over Russia has negatively impacted Air Canada, particularly from its Vancouver hub.
- Delhi Route: Air Canada is currently flying to Delhi 10 times a week and would like to increase this frequency.
- Relationship Improvement: Improved relations between Canada and India are expected to facilitate increased flights to India as Canada diversifies its trade.
Conclusion
Air Canada faces challenges related to geopolitical tensions, aircraft delivery delays, and the pace of recovery in the China market. The airline is actively managing these issues by diversifying its routes, advocating for improved trade relations, and working with aircraft manufacturers to mitigate delays. The company remains optimistic about future growth, particularly with the anticipated arrival of new aircraft and the potential for increased trade diversification.
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