Both Major Airlines Losing in Battle for Canada’s Skies

Canada’s airlines have too many planes, too many employees, and not enough profit. Following a consolidation that reduced the number of big airlines from three to two last year, there is talk that the industry needs further rationalization.

“There won’t be two airlines of equal size in Canada by the year 2000,” said Ted Shetzen, a Vancouver airlines consultant. “There should be one big carrier with about 50% of the domestic market and a big slice of the international market. Smaller carriers would share the rest.”

Air Canada has about 51% of the market and Canadian Airlines about 45%. Both are losing money. At least three smaller regional carriers are near bankruptcy. Last month Soundair, which operates a local carrier and a charter airline, was forced into receivership. Thousands of holiday travelers were stranded in Florida and the Caribbean when the airline went under.

Air Canada lost $11 million in the first quarter of this year and the results would have been worse without the sale of $18 million in assets. “We had hoped fuel costs would come down faster than they have,” said Pierre Jeanniot, president of Air Canada. He said 1990 would not be a good year for business in general.

To cut operating costs, Air Canada is getting rid of its entire fleet of 14 Lockheed 1011-100 aircraft. Those planes are used for domestic routes. It is keeping its Lockheed 1011-500, a long-range version used on overseas flights, but will phase out those planes in 1993. Canadian Airlines, which lost $29 million in the first quarter, expects to generate $247 million from the sale of Airbus A310 aircraft it acquired when it took over Wardair last year. It also cut its staff from 19,000 to 17,000 and says it will lay off even more people.

“We are turning the corner on profitability. The second quarter will be profitable,” said Murray Sigler, executive vice president of the holding company that owns Canadian Airlines.