There’s more turbulence ahead for Canada’s unsettled aviation industry as cost-conscious corporations rein in their travel spending and the David-and-Goliath fight for airline supremacy spurs a new crop of no-frills competitors.

The nation’s two largest airlines – Air Canada and rival Canada 3000 – are squaring off in an escalating campaign of seat sales, special incentives and revamped service in a desperate bid to retain their hold on diminishing market share.

And with travel and corporate spending down around the world and forecast to drop even further, even Calgary-based success story WestJet – which brought the concept of no-frills air travel to Canada – faces a bumpy ride as rivals try to steal its thunder.

Much of this battle will be played out in the arena of business travel, as airlines realign their strategies to address the new economic reality: for most penny-wise companies, time is money and endless expense accounts are a thing of the past. Some carriers are curbing their reliance on the corporate market, while new local carriers and charter firms are catering almost exclusively to business clients.



“As business travellers are told to watch their dollars . . . now all of a sudden the travellers are paying close attention to value,” says Paul Phee, one of three owners of no-frills carrier Smart Air Ltd. of Edmonton. The airline began operating nine-seat commuter jets between Calgary and Edmonton this spring, and Phee says engineers, lawyers, small business owners and consultants have been quick to hop aboard.

“Companies are going to go to extreme lengths to save money,” adds Calgary’s Brian Schwartzendruber, past regional chair of the Association of Canadian Travel Agents (ACTA). “The more prudent you can be on travel expenses, the better.”

The air wars have been fuelled by several recent developments, including debt-ridden Air Canada’s decision to launch its own budget airline and its move to offer deeply discounted fares in the crucial western corridor between Calgary, Vancouver and Edmonton – WestJet’s home turf. At the same time, WestJet – which recently recorded its 18th consecutive profitable quarter – has moved into the eastern market with new routes that threaten to lure business away from its larger rivals.

Schwartzendruber, marketing director of Premiere Travel Centre in Calgary, Edmonton and Red Deer, notes the new discount Air Canada carrier will in effect see the company compete against its mainstream service. The yet-unnamed budget airline has lured an industry heavyweight to the post of chief executive – former WestJet president Stephen Smith.

In a year that has seen more plot twists than a daytime soap opera, much of the attention has focused on Air Canada, which has about 80 per cent of the market share. The carrier has been accused of abusing its dominance with predatory pricing, and incurred the wrath of travel agents last week for launching an online-only seat sale and following ailing U.S. carriers by capping travel agent commissions.

Air Canada fortified its troops even further last week, unveiling a new website – destina.ca – that the carrier says will “offer customers one-stop travel, shopping, reservation and destination information services.”

Air Canada officials say the site will also “target the specialized needs of business travellers; those who either handle their own travel arrangements directly or indirectly without negotiated corporate agreements.”

The airline says it will improve profits and cut costs – including 4,000 jobs – after a second-quarter loss of $108-million.

Schwartzendruber called the new online initiative “baffling,” noting the website isn’t even up and running and will give customers the ability to book flights directly with the carrier’s competitors, along with Air Canada.

“It doesn’t make much sense, does it?” he joked. “Welcome to the world of travel.”

The safety of Canadian regulatory measures has also been called into question recently in the fallout from Air Transat Flight 236, which was forced to make an emergency landing in the Azores after running out of fuel.

Transport Canada fined the airline $250,000 last week for poor maintenance, but has assured the public that the airline is safe to fly. Passengers have filed a $50-million lawsuit against Air Transat, which is offering cash bonuses to travel agents who encourage them to book passengers on its flights.

The competition is still seen as good news – at least in the short term – for cash-strapped consumers who saw fares skyrocket after Air Canada merged last year with Canadian Airlines. Canada 3000 subsequently merged with charter carrier Royal Airlines and discount carrier CanJet, while Roots Air was gobbled by Air Canada after only five weeks.

However, a new crop of smaller carriers has opened up new options for air travellers.

“We can’t compete with the big jets . . . but we can compete in saving time and money. Smart Air’s all about a niche. We’re in tune with what the business traveller wants,” says Phee, of Smart Air.

Passengers arrive and depart from the municipal airport in downtown Edmonton – saving a 45-minute commute to the Edmonton International Airport – and parking is free.

Smart Air operates 20 flights a day between the cities for $109-$129 one-way, and offers a corporate ‘smart pass’ that allows passengers unlimited flights in a month for $599. All passengers can reserve their trip through travel agents, or simply walk on.

Business has been growing so steadily that the carrier is bringing on a third aircraft this month and will soon offer daily commuter service to the Vancouver suburb of Abbotsford.

Also thriving is northern Alberta’s Peace Air, which has run chartered flights in Alberta and B.C. for 35 years and began offering scheduled service three years ago. Peace Air appeals to the budget-conscious corporate client who values “good, consistent service” over perks, says sales and marketing director Toni Antonietti.

“When you’re paying a consultant $75 an hour to go somewhere or do something . . . they don’t have the time to waste fighting in a big airport,” she says. “Business is quite good for us . . . surprisingly good.”

Peace River-based Peace Air has offices in Calgary, Edmonton and Grande Prairie and flies to such communities as Fort St. John, High Level, Jasper, Prince George and Vancouver. The company launched a Calgary-Cold Lake service last month.

(Susan Mate is a Calgary-based travel writer and a Business Edge web editor.)