* Tickets already on sale; operations to start July 1, 2013
* Low-cost carrier to focus on leisure travel
* Shares rise 5.3 percent to C$1.79 on TSX
TORONTO, Dec 18 Air Canada's new
low-cost carrier will begin flying to European and Caribbean
vacation spots next year under the name "Rouge", the airline
said on Tuesday of the service it hopes will provide a
springboard for sustained profitability.
Montreal-based Air Canada, the country's biggest airline, is
launching Rouge at a time when Canadians have a growing number
of options for vacation travel. It will compete with Transat
, WestJet Vacations and Sunwing Travel Group.
"The Air Canada Leisure Group will be well positioned in
the highly competitive but growing leisure segment in Canada,
with its strong value proposition and competitive cost
structure," said Michael Friisdahl, who is heading up the new
venture, at a launch event in Toronto.
Rouge will offer cheap flights to tourists visiting the
Caribbean and Europe, starting July 1, 2013 - not June, as was
Tickets went on sale on Tuesday for flights to Venice,
Italy; Edinburgh, Scotland; Athens, Greece; Cuba; the Dominican
Republic; Jamaica and Costa Rica.
The fight for share of the vacation market has become more
important for Air Canada as main rival WestJet prepares to
launch Encore, its Canadian regional airline. Encore promises to
undercut Air Canada fares on domestic short-haul flights.
Rouge will expand to other destinations for next winter,
said Chief Commercial Officer Ben Smith. As Air Canada takes
delivery of Boeing 787 Dreamliner aircraft starting in
2014, it will funnel more planes into Rouge.
The airline plans to reach 50 Rouge aircraft in three to
five years, Smith said. He said the venture is expected to be
profitable in the "short, medium and long term".
Air Canada has reported a string of quarterly net losses in
recent years, weighed down by non-operating items such as losses
on foreign exchange and interest expenses.
But the airline was profitable in the third quarter, boosted
by a foreign exchange gain and higher operating income, as tight
cost controls started to pay off.
The leisure unit, a wholly owned subsidiary formed by
combining the new airline with Air Canada's existing vacation
package business, will initially use four Rouge planes taken out
of Air Canada's mainline fleet.
Rouge will take over some flights previously operated by Air
Canada Vacations, as well as the mainline fleet's seasonal
service to Athens.
The unit will have its own management team, headed by
Friisdahl, former chief executive of Thomas Cook North America.
Air Canada plans to hire 150 flight attendants and 50 pilots
for Rouge and expects to generate profits by fitting its planes
with more seats and paying lower wages.
Earlier this year, Air Canada secured new union deals that
included lower wages and less-generous pension plans for new
hires after more than a year of turbulent negotiations.
Customer service agents went on strike in the summer of
2011. The federal government passed legislation to prevent the
two unions that represent pilots and mechanics and baggage
handlers from striking, and there were short wildcat strikes
involving members of both unions.
Air Canada Chief Financial Officer Michael Rousseau has said
the new carrier will not have a material impact on Air Canada's
Shares of Air Canada rose 9 Canadian cents to C$1.79 on the
Toronto Stock Exchange.