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The Extinction of the Canadian Goose

By Colin Saunders
April 18, 2001

Before American and TWA there was Air Canada/Canadian. In this era of
mega-mergers, we take a look at what airline consolidation has meant in
Canada. Do only the strong survive?

Three years ago this July I flew across the Pacific Ocean on Canadian Airlines International, leaving behind everything familiar for a new life overseas. Many thoughts entered my mind that summer day, but none of them concerned whether my air carrier would exist when the time comes to fly home.

Canada’s civil aviation scene has undergone enormous changes since 1998. In three years new airlines have come and gone, old ones have ceased to exist, and still others have grown beyond almost all recognition.

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Canadian Pacific Bristol Brittania from 1961.
Photo © Mel Lawrence

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CP Air Douglas DC-10 from 1983.
Photo © Tony Rogers

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Wardair Canada Boeing 747 from 1976.
Photo © Eduard Marmet

The catalyst for all this change was the long anticipated, but slow-in-coming demise of Canadian Airlines. Once the successor of notable carriers Canadian Pacific/CP Air and Wardair, today’s Canadian is a wholly owned subsidiary of Air Canada. The once “Proud Wings” of the Canadian goose are now covered in Air Canada green.

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Canadian Airlines Boeing 737.
Photo © Felix Sieder

Historically, Canadian Airlines and its predecessors were strong in Western Canada and the Far East, while Air Canada dominated the more populous provinces of Ontario and Quebec, plus most of the air routes to Europe. Both carriers competed heavily for lucrative Toronto-Montreal business traffic, with Montreal-based Air Canada’s Rapidair service eventually securing that busy market.

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Air Canada Boeing 767.
Photo © PixAir

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Air Canada Lockheed L-1011 TriStar from 1989.
Photo © David Unsworth

During the late 1980s Air Canada’s management team made two key decisions that, in hindsight, contributed to their main competitor’s eventual demise. The first of these was the company’s fleet replacement program, which eventually saw the Boeing 767 replace the Lockheed L1011 on longer domestic and trunk routes, and the Airbus A320 and A319 supplant the Douglas DC-9 on short-haul sectors. Second, Air Canada leapt at the opportunities offered by the Canada-US Open Skies Agreement, a move that saw cross-border traffic (and revenues) soar. In contrast, Canadian’s pursuit of North American routes was less than vigorous.

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Air Canada Airbus A320.
Photo © Chris Coduto

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Air Canada Douglas DC-9 from 1996.
Photo © Michael F. McLaughlin

While Air Canada’s schedule grew, cash-strapped Canadian was constantly cutting back services and asking its employees for wage concessions, severely hurting morale. A limited fleet update was attempted which saw a small number of A320s, 767-300ERs and 747-400s make their way onto the company’s route system. However, the bulk of Canadian’s fleet still consisted of older 737-200s. These aircraft offered economic and marketing disadvantages that, when coupled with the airline’s cost structure, proved impossible to overcome. The Canadian Airlines fleet was more expensive to operate, required more maintenance and did not attract passengers like the new-technology A320 series did at their arch-rival’s ticket counters. This disadvantage was further exaggerated by Canadian’s decision to compete against Air Canada’s new CRJ Regional Jet services with turboprops and outdated Fokker F28s.

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Canadian Airlines Boeing 747 from 1995.
Photo © Guido Latz

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Canadian Airlines Fokker F-28.
Photo © Henry Tenby

Canadian Airlines reduced services to and within Western Canada, a move that contributed to its eventual demise by encouraging new entrants in that important and growing market. By the winter of 1995, Calgary entrepreneur Clive Beddoe had resolved to do something about the poor service and high airfares offered by the majors. He solved the travel woes of Western Canadians by creating a new low-cost carrier, a Southwest Airlines for Canada.

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Westjet Boeing 737.
Photo © John Davies

Westjet began services on February 29, 1996, a date chosen so the budget airline would only have to celebrate its anniversary every four years! At first Westjet used its two 737-200s on regional services from its Calgary base to Vancouver, Edmonton and Winnipeg, important commercial centres that were ripe for competition. As its flights grew in popularity, the airline rapidly expanded its fleet and schedule. Today, Westjet is Canada’s third largest airline, with a fleet of twenty-three 737-200s and a route network covering most of the country’s large and small cities. In 2000 Beddoe announced that Westjet would buy thirty-six new generation Boeing 737-600/700s (with options for fifty more) and lease a further ten, with deliveries set to begin on Canada Day (July 1) 2001 and continue through 2008. If all the NG737 options are exercised, Westjet’s fleet will have grown 4700% in its first thirteen years!

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Air Canada's dominant position has kept
Canada 3000 looking over its shoulder.
Photo © Luis Rosa

The decline of Canadian Airlines also inspired other carriers to join the scheduled market. Canada 3000 Airlines, a charter operator specialising in leisure travel, began offering domestic flights using its A320 and 757 aircraft. Like Westjet, Canada 3000 didn’t try to take the majors on in head-to-head battle. Instead, the Toronto-based carrier focused its low-cost services on under-served markets. Doing further damage to Canadian’s competitive position, Canada 3000 also inaugurated low-fare long-haul flights to Australia and India, initially with 757s and later the world’s first in-service A330-200.

Back home, Canadian was in deep trouble. A capital injection from Oneworld partner and part-owner American Airlines delayed the inevitable, but by the summer of 1999 industry-watchers knew it was only a matter of time before Canadian succumbed to its wounds.

Canadian’s moment of truth arrived when Onex Corporation (an acquisition and divestiture firm) and American Airlines made a hostile take-over bid for the carrier. Seeing an opportunity to do away with its chief competitor, Air Canada also entered the fray with the backing of Lufthansa and United Airlines, its major partners in the Star Alliance.

While media reports led people to believe that a battle royal was being waged over Canadian’s future, in reality the Onex/American Airlines bid was doomed to failure. Canadian law limits foreign ownership in the country’s airline industry, and since American Airlines already held the maximum percentage of stock allowed, their joint bid with Onex could not proceed. However, faced with the loss of up to 25,000 jobs if the stricken airline failed, the federal government allowed Air Canada’s bid to stand, even though the amalgamated carrier would have near total dominance of the Canadian air travel market.

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Canadian Airlines Douglas DC-10 in
CP Air colors from 1988.
Photo © Alastair T. Gardiner

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Canadian Airlines Boeing 747.
Photo © Rob Rindt

On July 7, 2000 Canadian Airlines International ceased to exist as a separate company. The new, much larger Air Canada embarked on an ambitious plan to consolidate Canadian’s routes with its own, and combine operations and their ticketing and airport facilities, all in 180 days. The merger was far from painless, and the Canadian press was rife with tales of lost bags, delayed and cancelled flights and missing air miles. The aviation enthusiast community expressed its dismay when Air Canada’s less-than-spectacular livery was quickly applied to the former Canadian fleet, obliterating the “Proud Wings” Canadian goose scheme that had won hearts the world over.

To ensure that fair competition was maintained in the domestic market, the Government of Canada passed new legislation that empowered a competition commissioner to hear and act upon complaints of high prices, collusion or predatory pricing designed to kill-off competition. Industry responded too, with more airlines announcing their entry into scheduled service.

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Royal Airlines Boeing 737.
Photo © Felix Sieder

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CanJet Airlines Boeing 737.
Photo © John Davies

Royal Airlines, a charter and cargo carrier based in Toronto, began scheduled flights when the new Air Canada began rationalising its services and eliminating its over-capacity on some routes. Royal was joined by Canjet, a new entrant owned and operated by IMP, a Halifax, Nova Scotia-based aerospace concern. IMP had previously tried—and failed—to run a Canadian connector airline, Air Atlantic, and industry analysts didn’t hold out much hope for its newest venture. Canjet’s small fleet of six 737-200s, its limited marketing power and its base in the less populated Canadian Maritime provinces didn’t appear to be a recipe for success.

Not long after it opened its doors, Canada’s competition office began receiving complaints from Canjet, which claimed that Air Canada was trying to undercut its low prices and force the airline out of business. With strong evidence to support its decision, the competition watchdog sided with Canjet and ordered Air Canada to raise fares on its routes to and from Halifax. Although the law was behind Canjet, the travelling public was not. The small airline was said to be losing C$2 million per month before Canada 3000 took it over in April 2001, in an all-stock purchase. Canjet was Canada 3000’s second purchase of the year; it had already strengthened its domestic position by acquiring Royal Airlines in February.

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Canada 3000 Airbus A330.
Photo © Craig Murray

When all its routes and fleet are combined, Canada 3000 will be the country’s second largest airline, and its second international carrier. The new Canada 3000 should prove a tough competitor for Air Canada, as the former claims to have better prices and service, and the highest fleet utilisation in the world. For now, it also has the youngest fleet in Canada, soon to be augmented with A319s. Indeed the future looks bright for the new number two airline, as American Airlines is said to be keen on Canada 3000 joining the Oneworld Alliance. Whether joining an alliance will force the elimination of Canada 3000s low-fare policy is an open question.

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Air Transat Lockheed L-1011 TriStar.
Photo © Rob Simmons - Orlando/Tampa Aviation Photography

Even with all these amalgamations, there are still two other significant players in the Canadian air transport market. Montreal-based charter carrier Air Transat has elected to sit out the feeding frenzy brought on by the Air Canada/Canadian merger, and it may well end up with the leisure market all to itself. Toronto’s Skyservice has thrown its hat into the ring, but in a form very different from the other new players. Combining with popular clothing maker Roots, Skyservice has created Roots Air, a business-traveller-oriented airline that began operating A320s in April 2001. Although the newest Canadian airline claims it will be profitable in its first year of operation, it faces an uphill battle. Time will tell if this latest experiment in air travel will go the way of Canjet or Westjet, but the current business downturn does not give Skyservice much leeway to secure its Roots.

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Roots Air Airbus A320.
Photo © Darcy Stevens

A threat facing all airlines in Canada is a proposal from none other than Richard Branson. The founder of Virgin Atlantic, Virgin Express and Virgin Blue wants to bring his brand of air travel to the Canadian market. So far the Canadian government is refusing to relax foreign ownership rules, and since Mr. Branson won’t accept anything less than a controlling 51% stake, the other carriers can rest easy—for now. The Ministry of Transport has said that they will entertain the idea of foreign ownership if competition in the Canadian air travel market stagnates. If the threat of a “Virgin Canada” doesn’t keep the market honest, perhaps nothing else will.

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Canadian Airlines Boeing 747.
Photo © Andy mok

No one knows how this story will end. Air Canada and Canada 3000 have their hands full with growing pains, and the worldwide economic slowdown is sure to stifle any further consolidations. Westjet is now a permanent feature at Canadian airports and, having won the hearts of disenchanted travellers, it’s the only profitable scheduled carrier in Canada. Roots Air remains the biggest question mark, and whether it can attract the now elusive business traveller remains to be seen. In the rapidly evolving Canadian air transport market, only one thing can be said with any certainty: when I go home this July, I won’t be flying on Canadian Airlines.

Written by
Colin Saunders

Canadian (citizen!) Colin Saunders is a life-long aviation enthusiast and avid traveler. He has been working in Japan for the past three years, but plans a move this summer. For his next career Colin hopes to land work in an airline's public relations, marketing or management offices

19 User Comments:
Username: Jsulyma [User Info]
Posted 2001-04-18 04:17:23 and read 32768 times.

This was a good article getting to the point without boring me with facts that are not relevant. I also like how he added how the other airlines where affected. Nice job Colin hope you write more.


Username: AC_B777 [User Info]
Posted 2001-04-18 05:47:57 and read 32768 times.

This is an excellent piece of writing. It shows what was and is happening with the various Canadian airlines and what is at stake.
It was informative and interesting. I liked the use of the pictures for the various airlines of this country.
Great work Colin!!


Username: Mcdougald [User Info]
Posted 2001-04-18 20:30:30 and read 32768 times.

As others have mentioned, a good article all in all.

But there is one thing I've often wondered about. In spite of its size, was American Airlines necessarily the best U.S. partner for Canadian?

It seems to me that, with the exception of Chicago and possibly the now-closed Nashville hub, American's DFW and Miami hubs were ill-suited to transborder travel except to and from the Gulf and Mexican border states. These hubs also gave American a weak presence in a number of northern states with the closest commercial ties to Canada.

With Air Canada married off to United (which has a fairly decent northern-state network of its own), should Canadian have, in retrospect, hooked up with Northwest and the Wings Alliance instead? True, NW isn't known for great service, but it has a strong northern network, with two of its three hubs in border states, and could have beefed up Canadian's presence in markets where CP was traditionally a weak competitor for transborder traffic. Add to that that several of NW's codesharing partners, namely Alaska, Horizon and Continental, following its split with AC, also had hubs near the border that could have strengthened CP's presence in the northeast and along the Pacific coast.

Comments are welcome.

Username: Colinsensei [User Info]
Posted 2001-04-19 02:26:48 and read 32768 times.

Thanks everyone for your kind comments. I hope to be able to contribute something here on a regular basis.

You've asked a good question Mcdougald: what was in the deal for AA? I suppose the best answer is access to Canadian's Far Eastern routes. Remember that Canadian Pacific / CP Air had been flying to Australia, Hong Kong and Tokyo for decades. American, on the other hand, was a newcomer to those markets. For its (relatively) small monetary stake in Canadian, AA got access to seats on trans-Pacific flights. That benefited AA's route system, and it also provided a new revenue stream in the form of USA bound Asian travelers who routed through Vancouver or Toronto and then took an AA trans-border flight. Their link-up with Canadian allowed American to compete for USA bound passengers without buying any more airplanes.

For the above reason, I don't think Northwest would have been a suitable match for Canadian. The great benefit of the AA alliance was the fact that a weak Canadian Airlines didn't have to compete with its partner on high-yield international routes. In NW, Canadian would be competing for the same traffic, and vice-versa.

As for cross-border traffic, AA received the benefit of Canadian's coverage of all the important domestic routes in Canada. If a business person flew into Toronto on AA, but then had to go to Calgary for another meeting, the only way to keep the money "in the family" was to have a Canadian partner. This may be why AA and Oneworld are interested in Canada 3000. Alliances have more sophisticated revenue sharing schemes that spread the money around a little more evenly compared to interlining.

Colin Saunders

Username: Trintocan [User Info]
Posted 2001-04-19 08:09:52 and read 32768 times.

A very interesting report. Canada's aviation developments are fascinating but have largely eluded me of late since that is not featured much in news broadcasts available here. Yes, the merger was big business talk here but little else.

Both AC and Canada 3000 serve POS regularly. Skyservice also comes here with charters, as do Royal and Air Transat. It will be interesting to see how theses airlines jostle with BWIA and with each other for the competitive YYZ market. AC, although consistently serving POS for over 50 years has gone from 767-200s at peak times to small A319s during the off-peak seasons and comes only 2-3 times weekly. The others have joined the market over the last 5 years, especially as the demand has exceeded capacity on BWee and AC.

Time will tell, as with everything. Will AC remain strong or will its massive size prove unwieldy? The smaller carriers may be able to keep tighter ships but if a recession arises, as seems likely now, the newer entrants will be most greatly affected. It is also interesting that so many 737-200s are in use in Canada - why not newer MD80s or 737-3/4/500s?(I admit that the A319/320 has an enormous base in AC and is spreading to others.)


Username: JAL [User Info]
Posted 2001-04-20 04:01:45 and read 32768 times.

Great Article, very informative. Sad to see Canadian Airline disappear.

Username: Ac_b747 [User Info]
Posted 2001-04-20 04:38:42 and read 32768 times.

I work for Air Canada, and I find that your article represents very well what has happened in Canada in the past 2 years. Even if I work for Air Canada, I am deeply sad to see the goose disapearing, because allmost all of my family worked for Canadian, and I allmost have always travelled with Canadian. Has I work in aircraft services, I can see that the integration is allmost finished, and that our service is really better than last year, where passengers had reasons to leave on other airlines. I really appreciated youre article!!
Hope to see you write soon again!

Username: AKelley728 [User Info]
Posted 2001-04-20 06:35:43 and read 32768 times.

It's interesting to note that Canada 3000 just announced that they are now a partner of AAdvantage. I'm sure membeship in OneWorld is not too far behind...

Username: A380 [User Info]
Posted 2001-04-20 18:12:35 and read 32768 times.

Very good! Better than the Airliners(?) article.

Username: Mcdougald [User Info]
Posted 2001-04-20 18:43:02 and read 32768 times.

Regarding Trintocan's question about the popularity of the 737-200 in Canada, I think a lot of it has to do with the model being well-suited to the unique needs of the Canadian market. With a relatively small number of city-pairs, point-to-point service has long been the most practical way of connecting city-pairs that don't involve flying from one side of Toronto to the other. The 737-200 was well-suited to such routes, as it was to the northern and small-airport operations of several of Canadian's predecessors, including Pacific Western, Nordair, Eastern Provincial and Transair.

Air Canada considered buying new 737s and MDs in the late '80s, but opted for Airbuses instead after a strong (and controversial) lobbying campaign by the European consortium, which badly wanted a high-profile North American customer in order to pick up additional sales in this lucrative market.

As for its use by the start-ups, I suspect they adopted the 737-200 simply because it was a cheap buy until they had enough money in the bank to upgrade to something better, as Westjet is now doing by ordering brand-new 737s.

As for AC's survival, it would be dangerous to assume that there will always be an Air Canada: the same was assumed about Eaton's. But it has a good chance of survival, with a dominant position in the market and a competitive product as Canada's increasingly close economic ties to the U.S. pushes Air Canada to look over its shoulder for its north-south competition, even if its east-west competition is a tad weak right now. (And then, as noted, there's always Sir Richard, who was successful in wiggling his way into the Australian domestic market in spite of Qantas' and Ansett's objections, and who has now turned his attention to Canada.)

Username: Leelasit [User Info]
Posted 2001-04-20 18:47:46 and read 32768 times.

Enjoy this article very much? One unquestionably scenario after the merge of AC and CP. The fare on some popular routes such as LAX to YVR or YYZ become unreasonably expensive. Lower fare with 21 days advance booking is constantly not available, that means the next tier of cheapest fare is USD 600 (LA to Vancouver). That may not be a intend of AC but obviously number of flights were reduced and not much competitors are around on these routes.
Glad to see Canada 3000, Royal and Canjet are stepping up to form a new organization. This will definitely bring the canada's sky to a new era. Hope to see more competitions in the future.

Username: Colinsensei [User Info]
Posted 2001-04-21 14:34:31 and read 32768 times.

Things continue to evolve in Canada!

Last week Canada 3000 joined American Airline's AAAdvantage frequent flyer program.

As part of its pre-merger deal with Canada's competition authorities, Air Canada had to agree to grant small airlines access to its Aeroplan FFP. By forcing this concession from Air Canada, the government hoped to improve the competitive position of smaller carriers.

Now that Canada 3000 owns Royal, it seems that Air Canada's management wants to sever the relationship. Interestingly, Air Canada waited until Canada 3000 had announced its greatly expanded summer schedule before it cancelled the FFP link-up, perhaps hoping to take the steam out of Canada 3000s early bookings.

It's up to you to decide whether the AAAdvantage program was waiting in the wings, or if it was already a done deal...

Another interesting development is the introduction of a business-class product on Canada 3000s aircraft. Presumably, this cabin upgrade has everything to do with keeping American's high-yield passengers happy when they interline into Canada. I'm wondering more than ever how long Canada 3000s low-cost strategy will survive now that the airline is firmly in the "big leagues."

Colin Saunders

Username: Airman99o [User Info]
Posted 2001-04-21 21:48:18 and read 32768 times.

hello there,
Very well written article. I have to agree on some points of it. But I am thinking that Roots is also going the way of one world as well. I am a flight attendant with Roots Air / Sky service and we have all the partners in the one world alliance as our interline partners. Hopefully Roots will be able to keep up and give C3 and AC a really good run for thier money.
I am also supurised that virgin Atlantic is also an interline partner with this airline as well as BA? I hope that we end up in a codeshare agreement with VA Seeing that Va is a niche airline so are we. I am totally amazed by the servie that we offer on this. I have flown on many of the majors first class and ended up serving on Roots Air gold class and am amazed that nothing has yet to come close to what I have seen on this. sure you may all think I am biased but this is a great service that we are offering and I really hope that people that have been totally pissed off with Air Canada and Canadi>n Merging get the hint and try this new brand. You will be pleasently supurised.
Well to end this I just hope that this dogfight between AC and the rest of the airlines in Canada is a good clean one and aircanada gets knocked down a couple of notches.


Username: Canadair 14 [User Info]
Posted 2001-04-22 18:48:31 and read 32768 times.

Great article!
Even though I am a Canadaian citizen I learned alot from your great article. The pictures really made it excitng. Hope to see more of your articles on here.

Username: I4group [User Info]
Posted 2001-04-24 15:32:57 and read 32768 times.

Very good article! The accuracy of it would have been that much better had you mentioned the bailout of Canadian Pacific by Pacific Western Airlines in Late 1985. Prior to the Airlines purchase CP had purchased several regional companies within Canada.

Username: Ckfred [User Info]
Posted 2001-04-25 06:10:09 and read 32768 times.

Very good and thorough article.

I thought that Canadian's problems were twofold. First, they kept flying 737-200s. While the aircraft may have been the right size for CP's route system, the older models use more fuel, need more maintenance, and do not meet Stage 3 noise standards in the U.S. This added to CP's cost structure. (This, among many other factors, was a big problem for TWA.)

Second, I got the idea that CP was being run as a subsidiary of American. When the Open Skies Agreement went into effect, AA started to offer service out of O'Hare to Ottawa, Winnepeg (since discontinued) and Calgary, as well at Toronto and Montreal. Service was also expanded from New York and DFW. But I noticed that for every three or four flights that American had on a route, CP had one. United and AC seem to split their routes evenly. While the AA/CP sharing kept AA's union workers happy, it probably hurt CP in the long run.

I've seen mention in the Wall Street Journal of Canada considering opening its domestic routes to US carriers, if AC doesn't get its act together. Considering that AA management is still smarting over their losses in the CP ownership, I could see AA adding service within Canada to complement C3. The question I wonder about is whether United would let AC fly alone within Canada? Or, considering the decline in passengers because of the pilots' discontent, would UA go into Canada to help its bottom line.

Username: Colinsensei [User Info]
Posted 2001-05-06 10:28:51 and read 32768 times.

We didn't have to wait long to learn of Roots Air's ultimate fate. Last week the airline's parent, Skyservice, announced a "strategic alliance" with Air Canada. As a result of this alliance, Roots Air will cease flying effective April 7.

In other news, Air Canada is reporting massive first quarter losses. Meanwhile, Westjet announced a profit for the first quarter (the airline's 17th consecutive quarterly profit), despite a decrease in the company's overall load factor.

Colin Saunders

Username: Raewen [User Info]
Posted 2001-05-09 20:12:20 and read 32768 times.

Its obvious the demise of Roots Air was exactly as Colin said, 'strategic'. I find the entire situation a bit sad as competition for Air Canada would have been/would be a welcome sight.

I don't know about anybody else, but if you have flown with Air Canada recently (which if you're living in Canada I'm sure you have) you have probably noticed, as I have, that their overall quality is plummeting. Massive delays, incredible overbookings, snappy flight attendants that look like they're ready to drop likes flies because they're so overworked - COMPLETELY unorganized! Its no wonder they are reporting massive first quarter losses!!

I've been at terminals in the last year, waiting for my flight on a wonderfully sunny day, talking to other travellers who have been waiting for 3-5 hours on stand-by because their flight was overbooked! I've had an international flight delayed almost 3 hours because they forgot to bring the 'duty free' bags for some of the passengers on board. I've seen flight attendants get fed up and just walk away from passengers, completely ignoring them. Its insanity!

People are getting tired of flying with them and are outsourcing other carriers whenever possible - Canada 3000, Westjet, Lufthansa, British Airways, Alaska Airlines - I'm one of the most pro-Canadian people you can meet but, at this point, give me anyone OTHER than Air Canada.

Username: Tango-Bravo [User Info]
Posted 2001-06-20 06:01:00 and read 32768 times.

An excellent update on recent developments in the Canadian airline scene, a subject that has been of special interest to me over the past 30 years. Though it was a sad day when it became official that Canadi>n/Canadian Pacific/CP air would be no more, it seems like the question for most of the past 20 years has been one of "when" rather than "if." CP seemed to offer quality service, making it the preferred carrier of many Canadian and international travellers when there was a choice.

It is exciting to see capable carriers like West Jet and Canada 3000 (having acquired Royal and CanJet) filling much of the competitive void left by the demise of Canadi>n and the takeover of Roots Air by Air Canada.

How interesting to learn that West Jet , like Southwest (two of a kind - also my kind of airlines), made a profit in the first quarter of 2001 while Air Canada and every major U.S. carrier except Southwest and Continental were posting significant losses.

Thank you for your exceptionally well-written, concise, and nicely illustrated article, Mr. Saunders, and keep up the outstanding work.

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