Retail Leaders Wary Of Expanding Air Canada Rouge Capacity
Canada’s airlines have put the focus on capacity discipline in the past few years, consistently filling 80% or more of their seats and adding routes and frequencies only after careful consideration.
But AC’s young leisure subsidiary Rouge is shaking things up a bit this year, adding more destinations in Europe, the U.S. and the Caribbean/Mexico region. While AC is shifting some of its mainline capacity to the lower-cost Rouge, there is some incremental capacity increase – how much is hard to measure – and there are some routes – YYZ-DUB for example, that are suddenly looking a bit crowded.
Open Jaw spoke to a couple of prominent Canadian retailers to get their take on the changes in the marketplace and the impact they might have.
TravelOnly President & CEO Greg Luciani is clear in his views: “The last thing Canada needs is more capacity depressing pricing. Don’t get me wrong, it’s great for customers. But if no one is making money, it’s poor business. We want a healthy industry and in the real world people need to make money.”
Richard Vanderlubbe, President of TripCentral.ca, is also watching closely as 2014 unfolds. “The increase in capacity will be interesting to see how the market absorbs it. So far, I don’t see a real impact yet. There is a lot of switching of inventory from AC mainline to the low cost alternative, and the net incremental capacity might well be gobbled up by demand from consumers for new experiences. For example, the extra capacity into leisure destinations in Europe could actually stimulate demand.”
Vanderlubbe says if the addition of capacity is not absorbed by the marketplace, it will simply go away. “We’ll see if it’s too much,” he says. “If it is, it will get dropped.”
In terms of the Rouge product itself, both Luciani and Vanderlubbe aren’t hearing much in the way of complaints.
“Rouge is a decent product,” says Luciani. “I have not had any negative feedback – but that’s because we sell it properly and manage the client’s expectations – it isn’t an AC plane. All the more reason for consumers to book with travel agents.”
Vanderlubbe agrees. “Rouge is a good economy product aimed at the leisure market, a customer base that values low price more than the frills that mainline Air Canada offers.”
That said, the long-legged Vanderlubbe laments the shrinking space that lower cost products like Rouge represent – even Premium Rouge is a squeeze compared to AC business class.
“I do believe there is going to be some blowback from diehard Air Canada business customers who experience Rouge for the 1st time because of expectations of service on the mainline routes. But this is a calculation that Air Canada made that the lower costs and extra sales will make up for this – besides – what choice will they have?”
Vanderlubbe is also concerned about the continuing commoditization in the way that airlines and distribution channels market flights – and the impact that is having on people who work in the industry. “I always joke that the day will come where the pilots and flight attendants will have their hats out for tips as their wages continue the downward spiral. A server at most bars makes more money than newly hired flight attendants these days.”
