Buckle up! In addition to a devastating pandemic, Canada’s air industry landscape has seen a lot of changes, with the entry of a number of new carriers in recent months and years. New comments from aviation experts and big player airline executives themselves are revealing how they see consolidation coming in the “next year,” along with other transformational changes.
A report in SimpleFlying quotes executives from Canada’s two biggest airlines, Air Canada and WestJet, declaring the continuous expansion of airlines in Canada, with long aircraft order lists, “unsustainable.”
Air Canada's Alexandre Lefèvre, Managing Director of Network Planning, is cited noting how smaller airlines like Flair and Lynx each have “around 50 737 MAXs on order along with 15+ A320s with Canada Jetlines.” According to Lefèvre, that’s a “huge” amount of new aircraft entering the Canadian market by 2027-28, and he says there aren’t enough new travellers to capture in a mature Canadian travel market to pay for all those new seats.
“It's highly unsustainable and there will definitely be more consolidation in Canada," he said. “Yes, the new entrants are well funded, but they won't sustain more than one winter,” he predicted.
An executive at WestJet agreed. Frank Satusky, Director of Commercial Strategy told SimpleFlying, “There are six or seven Canadian carriers with pretty big growth ambitions... nearly 200 aircraft coming in a few short years. It took us nearly thirty years to achieve a similar number.”
Yield right now is “a struggle,” especially in domestic air travel, he noted, with the increase in budget/ Ultra-Low Cost Carrier capacity and slow recovery of business travel. That’s bound to affect new entrants into the market.
"We will probably see consolidation next year."
Meanwhile, WestJet’s former CEO, Ed Sims, is also reading the tea leaves in his new role on the board of the carbon offset digital startup CarbonClick, where he provides expertise in reducing the carbon footprint of the aviation industry.
In an interview in Forbes, he predicted that the challenges aviation faces globally will apply pressure on airlines to seek out more partnerships, and that new alliances will be motivated by more than network connectivity that drove such partnerships in the past.
“More powerful global partnerships” can create “critical mass” and power for the airline industry to influence fuel markets, sustainability, labour shortages and other challenges to a return to profitability, he said.
The combined impact of pressure for more airline alliances globally, plus the Canadian market’s specific situation of the rapid expansion of competitors vying for nearly maxed-out numbers of pax, is believed to be setting the stage for a whirlwind of consolidation in the near future.
