In the United States, rising fuel costs have forced airline carriers like Delta and American Airlines to cut both routes and jobs—with executives happily playing the victim by reinforcing the myth of speculation causing higher oil prices. (Speculation actually decreases volatility and the blame for surging prices sits squarely on that boring old idea of supply and demand.) In Canada, two airlines will be cutting jobs: Jazz Air by 270 and its parent company Air Canada by 2,000.
The story’s interesting, especially compared to how the other carriers are performing. Westjet remains profitable and may expand routes now that it has entered into a venture with the U.S.-based Southwest Airlines to share customers. Smaller companies such as Bearskin and Porter are also holding on and have yet to trim jobs or flights. In fact, Porter’s flights to New York have improved on revenue estimates by 80%, and commutes to Montreal have increased more than 200% over a year.
The success of other carriers underlines the problem with Air Canada. The company has been unfocused since its merger with Canadian Airlines, as its bloated size makes it unable to adapt to the changing Canadian market. Although being the oldest airline currently in play in Canada should bring it experience and wisdom, it has also saddled Air Canada with the oldest—and potentially least fuel efficient—fleet. In addition to old equipment, the people in charge are fairly creaky as well: managers in monster companies often are slower to react (and less willing to), afraid that rocking the boat could cost them their jobs. For exhibit B, see the similar clunkiness in the American auto makers.
In an roundabout way, the dwindling economy may be the best thing to happen to Air Canada. The company will be forced into becoming smarter, hungrier for success, and more efficient—or face a path to irrelevancy. Already, the stock market has punished Air Canada, slashing the share price in the company by over 70% year-to-date. (Subsidiary Jazz Air is down 40%, while Westjet is down 20%.) Just as General Motors is gearing up the Volt as a last-ditch effort to stay relevant in the market, Air Canada must find its own spark of ingenuity.
Photo by News46 from the Torontoist Flickr Pool.