Doug Ashbury
Northern News Services
Yellowknife (Jan 22/01) - When Air Canada acquired Canadian Airlines, some wondered if NorTerra-owned Canadian North might find itself the weaker sibling and fly off into the sunset.
 Michael King |
YellowknifeLife: How has the merger affected Canadian North?
King: There were a couple of key items that hit us very close to home. One was any qualified Canadian carrier -- one with revenues over $250 million annually -- has access to Air Canada's frequent flyer program and the other was access to joint fares to markets that they don't serve. So where we had a fare from Yellowknife to Vancouver with Canadian Airlines we now have the ability to put in a equivalent joint fare (with Air Canada).
YellowknifeLife: What about making reservations?
King: We had set out on a path to follow Canadian Airlines into Air Canada's reservation system. We bought computers for this and set up training. About the end of August -- we'd been putting up red flags all along this was an issue -- Air Canada suddenly realized that within the reservation system (used) there was no way to do what's known as multihosting of a carrier. There is no way to have two separate carriers in there. It would mean each would have access to one another's records, fares, anything in that system, customer names, volumes. The remedy; we had to have our own operating code.
YellowknifeLife: Before, you didn' t have one?
King: There was no need. We operated as a Canadian Airlines franchisee, for lack of a better word. We've had to set up relationships with computer-reservations system distributors. All in all, we had to create a new commercial airline in about six weeks (because of the combining of Air Canada and Canadian Airlines reservations systems). We accomplished something in six weeks that ideally you would like six to eight months for.
When we went (changed codes) we lost the links to the south network.
YellowknifeLife: What kinds of things did you lose?
King: Right away we (temporarily) lost our through-pricing -- the ability to price Yellowknife-Vancouver (as one fare). If you were to fly a Canadian North ticket from Yellowknife to Edmonton and an Air Canada ticket from Edmonton to Vancouver you'd pay full fare on each. When airlines combine a joint-fare across the two which is cheaper than buying two separate tickets for the one trip. It's a cheaper rate. For us it's a critical competitive issue and we have through-fare pricing.
YellowknifeLife: What about the rumours on the company's future?
King: When we weren't put into the Reservation 3 system, that spawned a lot of nasty rumours that Air Canada wanted to get rid of us and that's how they were going to do it. It was more of a legal problem that they couldn't separate the two carriers.
YellowknifeLife: What about the upside? You must be much more in control now.
King: As a franchisee, we were locked at the hip with anything Canadian Airlines did and we had strict limits on how far we could move away from that. As an independent carrier we can look at different ways of doing things and we don't have to care if somebody in Calgary gets upset if we try and do it a bit differently.
We now have our own reservations group in Toronto which was carved out of the Air Canada group. There's about 15 people in Toronto who do nothing but look after Canadian North's reservations calls. They know who we are and where we fly.
YellowknifeLife: The merger of Air Canada and Canadian prompted you to move ahead with the overall plan to be more independent?
King: Certainly on the commercial side; how we display ourselves to the public, that's happened quicker than we planned. The next step is to bite off the operating certificate chunk. Pilots, maintenance, flight attendants are the three key areas. (Canadian North's contracts with Canadian Airlines for pilot, maintenance and flight attendant services are in force with Air Canada).
YellowknifeLife: Ultimately, will you have to do that?
King: That's been the plan since NorTerra acquired Canadian North. We want to grow into it as opposed to doing it just for the sake of doing it. We're in the process of plotting out that path. We have bit more time for this part.
YellowknifeLife: What about cargo?
King: This goes to the joint rate issue. We had (a system) in place through rates with Canadian Air cargo. On rates, we split the revenue based on mileage. But Air Canada bought Canadian and their rate structure is significantly different. Air Canada looked at what they were getting for an Edmonton to Vancouver portion of a Yellowknife to Vancouver shipment and it was out of line with what they wanted to get.
YellowknifeLife: So cargo fares went up?
King: We sat down and said 'here's our through rate today' and 'here's what Canadian North got' (for Yellowknife to Edmonton). Take that amount out and put beside it what Air Canada wanted on the Edmonton-Vancouver portion and add the two together and that's the through rate. That process jacked the rates up because Air Canada's structure was different.
A lot of it goes to business practice and I guess you have to speak to them as to what their philosophy is on cargo by they generally charge more for cargo in those types of situations. Our rates haven't changed and what we get hasn't changed. If you're shipping to Toronto, we still get the same chunk we got before.
YellowknifeLife: So bottom line, on the merger to the South, can you rate it from the Northern perspective?
King: On the company side, I'd say there is good and bad. The bad is here now, dealing with customer service issues, trying to make everything come back together again.
The good is the future and the long-term opportunity that comes with more independence. The opportunity to react faster and more appropriately to our marketplace.
There are huge commercial opportunities coming up in the North in the medium to long-term -- natural gas activity, pipeline work, Diavik mine coming on stream, more mining activity in the East. The good will be the long-term.