Air Canada leaving domestic market?
Tango seen as part of strategy
Air Canada may have begun its transformation into a predominantly international carrier by launching Tango in the hope that domestic passengers will flock to the new, discount airline, some observers say.
By creating a no-frills Wal-Mart of the Canadian airways, Air Canada may be trying to streamline the mainline carrier and slowly withdraw from providing costly domestic service, said Joseph D'Cruz, a business professor with the University of Toronto's Rotman School of Management.
``Once a Wal-Mart really achieves traction, the eatons are dead. If Tango achieves traction, Air Canada as we know it today is dead. So much of their business will migrate to Tango - particularly because Aeroplan points are available on Tango - that the mainline business will just not be very profitable.''
Air Canada officials remained adamant yesterday that Tango is a discount leisure airline - separate from the low-cost carrier it still plans to launch at some unnamed future date to take on Calgary-based discount airline WestJet and Toronto-based Canada 3000.
But the fact that Tango will fly to most major Canadian cities starting Nov. 1 and just three Florida sunspots - Fort Lauderdale, Orlando and Tampa - has made many suspicious that it's a wolf in sheep's clothing and will slowly turn into the low-cost carrier Air Canada has maintained is critical to its future.
Air Canada says it hopes to keep the service economical - with fares some 80 per cent below the mainline carrier's full-fare economy rates - by cramming more seats on planes and offering ``all extras are optional'' service.
But many questioned yesterday how the new airline could hope to make money when Air Canada's biggest cost is labour - and the 13 Airbus A320s will be staffed by workers earning the same as those at the mainline carrier.
``The cost of lunch doesn't make or break an airline. What makes or breaks an airline is the wages. So are they going to do it (make money)? That part I don't know,'' D'Cruz said.
``I believe there is a change happening in the market. Customers are deciding that all they need is a carrier that provides them with safety, comfort, more or less on-time departures and pricing they can understand,'' said Queen's University business professor Douglas Reid.
``Air Canada also has to find a way to reinvent their core domestic business which, relative to what the market wants, is grossly overpriced.''
Tango especially makes sense as a domestic carrier now because most major corporations have severely cut, or stopped, business travel, adding to the already drastic drop- off in high-yield traffic that began hitting Air Canada last winter, Reid said.
``Conventional domestic service is high cost, it has limited attraction and it is the type of service that will only be profitable when you get a recovery in business confidence. Right now the defensive play is not to bank on that happening for a while.''
Air Canada's stock continued to nosedive yesterday, closing at $2.30, down 17 cents.
Source Toronto Star
Oct 11th , 2001
The media and general public r u not stupid they know EXACTLY WHAT AC IS UP TO. Therefore "TANGO" and there mission to disrupt/distroy, healthy airlines like WestJet and Canada 3000 will not work. If your following the shares at AC it has droped 37cents since the announcement of "Tacky Tango" division of AC. With all the bad publicity pointed at AC, they r in the fight for there life to stay in the air. Special when the federal Gov't said too bad so sad, u have a collective contract that must be followed and did not allow AC to scrap over a 1200 employee's apparently costing the company over 3million a week. Yeah right!!!