It takes 2 to Tango

[Blastor]

If you subsidize rivals, no flights to Toronto, Air Canada tells PEI

By BRENT JANG

Monday, July 18, 2005 Page B1

TRANSPORTATION REPORTER

Air Canada is cancelling its Toronto-Charlottetown fall and winter flights because it's livid about the PEI government's subsidies for rival WestJet Airlines Ltd.

Air Canada will be placing advertisements in local newspapers in Prince Edward Island this week to notify travellers about the airline's withdrawal, beginning in October, of flights between Toronto and Charlottetown.

PEI Premier Pat Binns' government had lured WestJet to launch service in the province by providing about $500,000 in marketing and revenue incentives.

WestJet made its PEI debut on June 28, when it launched its Toronto-Charlottetown summer-only route, offering daily non-stop flights to and from the island. The seasonal service is scheduled to end Sept. 15. Air Canada points out that it uses profit from the summer to bolster weaker winter months to maintain the route year-round, so the carrier is disturbed that the government chose to subsidize WestJet at the height of tourist season.


"Despite numerous discussions and meetings with PEI officials, including the Premier, over the past few months, we were unable to come to an agreement that would have levelled the playing field and enabled Air Canada to maintain its year-round service between Charlottetown and Toronto," Air Canada spokeswoman Laura Cooke said.

Air Canada, through its Jazz subsidiary, will continue to provide year-round flights to Halifax and Montreal from the PEI capital. Its Toronto-Charlottetown Jazz service will resume next spring, but will only last for six months before going dormant again in October, 2006.

The airline has notified Mr. Binns and federal Transport Minister Jean Lapierre about its decision.

On April 26 in the PEI Legislature, opposition Liberal leader Robert Ghiz criticized the provincial Progressive Conservative government for interfering with air schedules and ignoring the implications of the WestJet subsidies. But Mr. Binns played down a letter of complaint written April 21 by Air Canada's senior director of corporate affairs, Lyse Charette.

The government's meddling forced Montreal-based Air Canada to scrap plans to boost passenger and cargo service in the summer to the island, Ms. Charette said.

Ms. Cooke added that Air Canada has been a loyal corporate citizen in Prince Edward Island, helping the local economy by transporting visitors from Canada and Japan wanting to see Anne of Green Gables tourist attractions.

"Air Canada and its regional and associated carriers are proud to have served Charlottetown for more than 30 years -- longer and more consistently than any other carrier -- and to have contributed over that period to the economic development of the province," Ms. Cooke said.

WestJet spokeswoman Gillian Bentley said the Calgary-based discount airline has yet to decide whether to extend its Toronto-Charlottetown flights beyond the targeted ending date of Sept. 15.

"It will depend on how the service is going and our aircraft availability," Ms. Bentley said. "For Charlottetown, it's more of a tourist and seasonal thing. We have to be sure that the numbers are there and it's got to be a feasible route."

A unit of Northwest Airlines Corp. of Eagan, Minn., is providing Detroit-Charlottetown summer service with the aid of $200,000 in PEI subsidies, critics say.

"The government's decision to support other carriers during the lucrative summer peak season has distorted market forces," Ms. Cooke said.

Air Canada has been benefiting from flying Japanese passengers on its Tokyo-Toronto route before connecting them on to the Toronto-Charlottetown service. But Canada's flag carrier sees Northwest as a competitive rival for carrying international visitors to Charlottetown.

Taxpayers money at work...........again

[Flightlevels]

FYI...it was a guarantee only for WJ if it didn't break even and so far WJ has not had to aquire one dime from PEI or the taxpayers...had the route not yielded for the summer then the tourism branch would have paid to top up to the guarantee. marketing for the flights was thrown in on thier own tourism ads adding a little WJ quip on the bottom of thier ads both on TV and newspaper etc....the press at work again if they only dug for the facts.

[NovaBoy]

It's funny how Air Canada forgot to mention the Montreal Charlottetown flights done by JAZZ were also subsidized by the PEI government.

[195psi]

Dispute leads Air Canada to cancel Toronto-P.E.I. winter flights
Last Updated Mon, 18 Jul 2005 17:36:00 EDT
CBC News
Air Canada will cancel its direct Toronto-Charlottetown flights from October until next spring because the P.E.I. government provided subsidies to rival WestJet Airlines, the company said Monday.

Air Canada spokesperson Laura Cooke said advertisements will be placed in P.E.I. newspapers notifying people of the decision.



The move is the latest development in a three-month dispute between the airline and the provincial government. It began when the province enticed WestJet to launch a summer service to P.E.I., promising $500,000 in marketing and revenue incentives.

WestJet began operating flights on June 28, with the intention of ending the service on Sept. 15.

Cooke said the provincial government is disrupting the Prince Edward Island market by providing a subsidy to a competing carrier during the most lucrative period of the year.

"Generally, the returns generated during the summer have made up for the marginal returns during the winter months," she said.

"Because the market forces have been distorted, from a business perspective we can no longer justify offering a route during the leaner winter months," Cooke said.

The P.E.I. capital will continue to be served year-round by flights to Halifax and Montreal operated by Air Canada's Jazz subsidiary, and passengers can connect to Toronto from those airports. The direct Toronto-Charlottetown service will resume when business picks up in the spring, Cooke said.

Cooke said Air Canada held numerous discussions and meetings with P.E.I. officials, including Premier Pat Binns, before making the decision to cut the routes.

The airline said it has notified both Binns and federal Transport Minister Jean Lapierre of its decision.

Premier unfazed by cancellation

Binns held a news conference Monday to say Air Canada's action was "not the end of the world," noting that the airline would continue to operate direct year-round service between Charlottetown and Montreal.

"We provided a subsidy to them to initiate that Montreal service and its been so successful that they run three airplanes a day from Montreal and two in the wintertime," he said. Binns said the province tried unsuccessfully to resolve the dispute in recent weeks.


P.E.I. Premier Pat Binns (File photo)
"We were not able to come to a satisfactory agreement," he said. "Air Canada wanted exclusivity in regard to advertising and they also ... wanted involvement or a veto in terms of additional carriers coming in the future."

Binns said the province will look to another airline to provide direct flights between Toronto and Charlottetown during the fall and winter.

Responding to Binns' comments, Cooke said the premier was misrepresenting Air Canada's position.

"We were not seeking a veto, but were rather recommending a competitive bidding process for new entrants in the market," she said. "It's not a truthful characterization of what we said."

Cooke also denied that Air Canada was looking for special treatment in advertising.

"We were seeking the same understanding as WestJet is receiving," she said. "We were not seeking exclusivity; we wanted precisely the same consideration."

[Rebel]

""We were seeking the same understanding as WestJet is receiving," she said. "We were not seeking exclusivity; we wanted precisely the same consideration."

WestJet, lured to the Island by $500,000 in marketing and revenue incentives, has offered daily non-stop service between Toronto and Charlottetown since June 28. But that service is limited to the summer.

Cooke said subsidies for WestJet made it difficult for Air Canada to continue service in the fall and winter, when there are fewer travellers.

"Because the market forces have been distorted, from a business perspective, we can no longer justify offering a route during the leaner winter months," Cooke said.

WestJet spokesperson Gillian Bentley said the Calgary-based discount airline has yet to decide on whether to operate Toronto-Charlottetown flights beyond the targeted ending date of Sept. 15.

Despite its decision to cancel direct flights in winter to Toronto, Air Canada will continue to provide year-round service to Halifax and Montreal"

[CFV2]

When did the revenue guarantees jump from $300,000 to $500,000?

The amount quoted during the news of Air Canada's announcement they were cutting back their PEI summer sched, back in April, originally stated that the PEI government offered WestJet $300,000 in revenue guarantees; however, Air Canada's spokesperson exaggerated that as being "close to one half-million dollars" in their letter of complaint to the PEI government.

So what is it? Was it $500,000 all along, or has Air Canada's exaggerated figure now become accepted fact?

[Rebel]

WJ=$500,000
NW=$200.000
AC=$0

AC is maintaining its summer YYZ-PEI schedule but dropping its winter YYZ-PEI schedule. The AC PEI sevice to Montreal and Halifax remains unchanged.

[CFV2]

WJ=$500,000
NW=$200.000
AC=$0

AC is maintaining its summer YYZ-PEI schedule but dropping its winter YYZ-PEI schedule. The AC PEI sevice to Montreal and Halifax remains unchanged.

The YYZ-YYG sched was already reduced back in April, in protest over the amount WJ got in revenue guarantees from the PEI government.

And I thought AC got a revenue guarantee as well from the PEI Provincial government for its YUL-YYG service a while ago....

And when did WestJet's amount jump from $300,000 (as originally quoted in April when this came up) to $500,000 (as is quoted now?). Any rhyme or reason for the change in figure?

Hrm... might be cause to email the PEI Premier to clarify the amount. I'll do that.

[CanadaEH]

WJ=$500,000
NW=$200.000
AC=$0

AC is maintaining its summer YYZ-PEI schedule but dropping its winter YYZ-PEI schedule. The AC PEI sevice to Montreal and Halifax remains unchanged.

The "revenue guarantee" is $300,000 (not $500,000 as was reported by AIR CANADA) and is only applicable to Westjet if it's unable to profitably fly the route for the duration of its service. Why don't you email the premier of PEI and see how much of that revenue guarantee has been passed along to Westjet, Rebel? You might be surprised to hear/read the results....

[Rebel]

CanadaEH

The WJ "revenue guarantee" as reported in all the financial newspapers as well as quoted by all the financial commentators that I’ve heard is $500,000. Wither any of it is actually used is immaterial as at this point no one knows how much of it will be used.. Perhaps the news media mistakingly added together both guarantee’s, I don’t know, but that’s what’s being reported. Hmm 3+2=5, could bad old AC be telling the truth? Why don't you take up your argument with the the news media and point out the error of their ways? I'm sure they will be as impressed as I am.

[double-j]

i think the 500 000 works out to 300 000 in guarantees and 150 00+ in advertisements for WJ. But that is IMHO.

jj

[CFV2]

CanadaEH

The WJ "revenue guarantee" as reported in all the financial newspapers as well as quoted by all the financial commentators that I’ve heard is $500,000. Wither any of it is actually used is immaterial as at this point no one knows how much of it will be used.. Perhaps the news media mistakingly added together both guarantee’s, I don’t know, but that’s what’s being reported. Hmm 3+2=5, could bad old AC be telling the truth? Why don't you take up your argument with the the news media and point out the error of their ways? I'm sure they will be as impressed as I am.

$500,000 is what they're saying now - but it's wrong. But that's alright, the media rarely gets things right anyway....

But they had it right three months ago, when the CBC reported the amount was $300,000. I posted a link to the original article above. But, as near as I can guess, it seems now that the media is taking Air Canada's word that the amount is actually $500,000, or rather, close to a half-million dollars - which is an exaggeration they've made since their original letter of complaint back to the PEI government, in April.

The official word of the Government of PEI seems to disagree - the amount of the revenue guarantee to WestJet is $300,000. I'll take that as being probably the most accurate answer - they are, after all, the ones who signed the deal.

As for the travel advertising... TravelPEI supposedly spent about $175,000 to promote travel to Prince Edward Island, along with "other activities" (see the press release I linked to). Maybe all those "other activities" are advertising for WestJet, maybe Northwest Airlink is included. Either way, it doesn't quite add up....

And besides, the Government of PEI has stated that, "Short-term guarantee offers provided to both West Jet and North West Airlines are not uncommon and, in fact, Air Canada was provided a similar offer in 2002 for their Montreal-Charlottetown flight. As it stands today, both West Jet and North West Airlines are performing strongly and, if the trend continues, revenue guarantees are not expected to be paid out to either company." - Link.

[CanadaEH]

The WJ "revenue guarantee" as reported in all the financial newspapers as well as quoted by all the financial commentators that I’ve heard is $500,000. Wither any of it is actually used is immaterial as at this point no one knows how much of it will be used.. Perhaps the news media mistakingly added together both guarantee’s, I don’t know, but that’s what’s being reported. Hmm 3+2=5, could bad old AC be telling the truth? Why don't you take up your argument with the the news media and point out the error of their ways? I'm sure they will be as impressed as I am.

See CFV2's post. I don't need to take up my arguement with anybody because I have more important things to do with my time.. thanks for the advice though.

[CFV2]

Looks like the WestJet brass is postulating aloud, again...

WestJet may broaden Toronto-PEI service ... from the Globe and Mail.