Air Canada Rallies Amid Debut Plans for Low-Cost Carrier

Air Canada (AC/A) rallied amid plans to start flights on its low-cost carrier in June, with routes to holiday destinations in Europe and the Caribbean.

The new unit of Canada’s largest airline will begin operations with four planes and may expand to as many as 50, the Montreal-based company said today in a statement. The segment will be combined with the company’s tour-operator, Air Canada Vacations, to form a new “integrated leisure group.”

The move into low-cost travel follows a July decision by a government arbitrator that allowed implementation of cost-saving steps in new employees’ pension plans and the startup of the new unit. Air Canada had the highest cost to fly one seat a mile among North American airlines for the past three years, according to data compiled by Bloomberg Industries.

Air Canada’s widely traded Class B stock rose 3.1 percent to C$1.35 today in Toronto, the highest close since Feb. 6. The stock has gained 36 percent this year.

Last month, Air Canada announced plans to hire 200 flight attendants and pilots in the next year at the new leisure carrier and more than 900 additional employees at the main airline.

Airline Brand

Half of the cost savings compared with Air Canada’s mainline will come from an increase in the number of seats on each aircraft, while work rules and wage rates will account for the other half, Chief Financial Officer Michael Rousseau said Sept. 19 at an investor conference in Montreal.

It will take “several years” for the low-cost unit’s fleet to reach 50 aircraft, he said.

“There are markets that we do not currently fly in transatlantic, that we believe using the Air Canada brand, the Air Canada strength, we can be very, very successful at,” he said.

Michael Friisdahl will lead the new leisure group, Air Canada said. Friisdahl, who has more than 25 years of experience in the international leisure-travel industry, previously served as chief executive officer of Thomas Cook Group Plc (TCG)’s North American unit.

To contact the reporter on this story: Frederic Tomesco in Montreal at tomesco@bloomberg.net

To contact the editor responsible for this story: Ed Dufner at edufner@bloomberg.net

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