Air Canada can boost share of Canada-Europe travel market

Avatar for Brian DunnBy Brian Dunn | December 12, 2019

Estimated reading time 4 minutes, 41 seconds.

Air Canada’s already-dominant 42 per cent seat capacity share of the Canada-Europe summer travel market could be boosted even further with the pending addition of Air Transat’s 18 per cent share, the number two player on the route.

Air Canada has reinforced that it is currently in the midst of an exclusive agreement with Transat A.T. to purchase any and all outstanding shares of the tourism company. Air Canada Photo
Air Canada’s share of the Canada-Europe summer travel market would be boosted to 60 per cent if its proposed acquisition of Air Transat goes through. Alvin Man/Air Canada Photo

Despite those figures, new routes from other airlines, including WestJet and European-based carriers, combined with the ability of travellers to reach the continent via connections at European or other North American hubs, ensures competition on the Canada-Europe market will continue, according to a report by National Bank of Canada Financial Markets.

“Perhaps the largest concern from regulators stemming from the acquisition of Transat by Air Canada [which is waiting approval], is the market share of flights from Toronto’s Pearson airport and from Montreal to trans-Atlantic destinations, which (combined) stand at 67.2 per cent and 67.5 per cent, respectively, in summer 2020. However, one possible remedy, if required, could be for Air Canada to cede some prime-time slots and/or gates at these airports to other airlines,” suggested the report’s author, Cameron Doerksen.

Total trans-Atlantic seat capacity is expected to be up 5.6 per cent from last summer and well above the 2.4 per cent growth rate of summer 2019. The higher, anticipated 2020 rate is partly due to the expected re-launch of 737 Max flights that were cancelled last summer.

For Air Canada, the trans-Atlantic corridor accounts for about 27 per cent of total revenue during the second and third quarters, according to Doerksen. And while the carrier will face new competitive capacity to Paris next summer, industry capacity growth to London, its most important European destination, looks modest.

For the past few summers, WestJet has been expanding its European operations and has firm plans to add 10 B787 wide-bodies to its fleet — six slated to be in service next summer — with options for 10 more, to become a more significant player over time.

“If WestJet also becomes part of a trans-Atlantic joint venture with code-share partners Delta and Air France-KLM as is widely expected, it will further solidify WestJet as a very capable competitor with extensive network connections on both sides of the Atlantic,” added Doerksen.

Competition will also come from European-based leisure travel airlines, including LEVEL, Corsair and Aer Lingus, which are adding capacity to Canada next summer. Legacy airlines such as Air France-KLM and British Airways are planning to increase frequencies to Canada, with Air France adding more flights from Paris to Toronto and Montreal.

On the Toronto-London route, Air Canada will have a 52 per cent seat capacity share, with Air Transat adding another 15 per cent for a combined 67 per cent. However, Air Canada serves Heathrow, while Air Transat flies to Gatwick. Air France has a 38 per cent seat share of the Montreal-Paris route, the largest of all carriers. But a combined Air Canada (21 per cent) and Transat (24 per cent) would hold a 45 per cent market share.

New routes for Air Canada next summer include Toronto-Brussels and Montreal-Toulouse. WestJet will add Calgary-Rome, while Transat will feature Montreal-Copenhagen and Toronto-Faro, Portugal.

Early projections of fares on certain routes indicate that year over year, Toronto-London fares will be up 20 per cent, Montreal-Paris up 23 per cent, Vancouver-London up 11 per cent, Toronto-Dublin up 24 per cent, Toronto-Lisbon up 45 per cent and Montreal-Barcelona up 11 per cent. Off-peak pricing may not show the same trend, noted Doerksen.

“We are…encouraged by our first pricing survey, which suggests a rational competitive environment and still solid demand, although it is still very early in the booking curve.

Based on our updated market share analysis for summer 2020, we reiterate our view that Air Canada’s proposed acquisition of Transat will receive regulatory approval. However, we are not yet incorporating Transat into our Air Canada forecast, but we see the potential for revenue and cost synergies over time.”

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