Columns

Flying around Air Canada

Deirdre McMurdy September 25 2000
Columns

Flying around Air Canada

Deirdre McMurdy September 25 2000

Flying around Air Canada

Deirdre McMurdy

It is said about academic politics that the fighting is so intense because the stakes are so small. But that adage could be applied just as easily to Canadas airline sector, where a flock of increasingly aggressive small carriers are scrapping over the fragments of the domestic market not entirely dominated by Air Canada.

In recent weeks, some of the start-up mini-airlines, which hope to profit from travellers’ demands for lower prices or an alternative to the troubled monopoly, have had a turbulent flight. Last week, the president and chief executive of Calgary-based Westjet Airlines Ltd., Stephen Smith, was unceremoniously dumped by company founder and executive chairman Clive Beddoe. The previous week, Canjet Airlines inaugurated a new air service in Eastern Canada. Within days, it had filed a formal complaint against Air Canadas “predatory pricing” with the federal Competition Bureau. Air Canada had slashed ticket costs on several competitive routes just one day after Canjet’s launch. Meanwhile, the much-heralded start-up of RootsAir has now been delayed from November until early 2001.

Watching the turmoil among his potential rivals is Michel Leblanc, founder, chairman, president and chief executive of Montreal’s Royal Airlines. On Aug. 24, after two years of quiet planning, Royal announced that it was doubling its low-cost, scheduled flights on key routes in Eastern Canada.

Its new service is especially noteworthy because it offers Aeroplan points to its customers, redeemable on Air Canada, Royal or other participating carriers. Royal was able to make that offer because when Air Canada acquired Canadian Airlines International Ltd., one of the conditions imposed by the federal Competition Bureau was that the Aeroplan program be opened to other carriers who wanted to purchase and distribute points in the popular incentive plan.

A veteran of the airline business, Leblanc says he’s confident that the relatively small domestic market can comfortably sustain all of the fiercely competitive entrants. “The market is actually getting bigger because of the economy, and lower fares directly stimulate demand,” he insists. “We know the niches we want to dominate, and that’s where we’re focused.” After years of building a charter airline service, Leblanc is intent on securing a chunk of the business travel market. That’s where Aeroplan points and the increased frequency of daily flights between Ottawa, Montreal and Toronto enter his strategy.

Leblanc has literally spent a lifetime to reach this point in his career. His father, Roger, was general manager of a small

airplane charter business and flight school in Quebec. As a teenager, Michel refuelled and washed planes every summer. “You have quite a realistic sense of the business when you’ve spent hours scrubbing the bugs off aircraft windshields,” he notes. And he still recalls with delight his first flight, at age 5, with his father in a two-seater Piper J3.

After graduating from the University of Montreal and completing an MBA at the University of Buffalo, Leblanc spent most of the 1970s in the sales end of the aviation industry. By the end of the decade, he and a partner had formed their own venture, winning lucrative government contracts to spray forests in northern Quebec from old transport planes. In 1986, the government of Quebec privatized Quebecair, and Leblanc, backed by investors, bought the cash-strapped regional carrier. “Quebecair was a complete basket case,” he says of the firm he turned around and made profitable in 18 months.

Eventually, Quebecair became the regional affiliate for Canadian Airlines. But that relationship fell apart when Canadian hit financial turbulence in 1990. By 1991, Leblanc had decided to sell out and take a break. But his vacation didn’t last long: in April, 1992, his new charter airline service, Royal, took off.

Leblanc admits that operating a low-cost holiday charter service to the Caribbean and Mexico is quite different from being a scheduled carrier. As a charter service, Royal only had to sell itself to a small, familiar circle of tour operators. Now, it has had to develop a marketing program for the general consumer, deploy a computer reservation system, lease more jets, and hire and train new staff in a tight labour market—all at a time when fuel costs are soaring.

Still, Leblanc is convinced the time is right for Royal’s push away from its dependence on the charter market. He says the advent of the Internet makes it much cheaper to organize and distribute tickets to a wide range of consumers. And over the past two years, the company has been working to develop a reliable in-house reservation system. “Our objective is to have you wait one minute, not 15 minutes, like some,” he says, referring to one of the major complaints about the post-merger Air Canada.

Instead of confronting the high cost of new planes, Royal will initially lease some secondhand aircraft this fall, bringing its total fleet to 16. And despite sniping from competing start-ups, Leblanc is optimistic. “We’ve always gone where opportunity takes us,” he says. “What matters is just being in the airline business.” No matter how high his airline may fly, Leblanc himself is determined to keep his attitude pragmatic—and grounded.