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November 30, 1999
Area has big stake in fate of carrier
Analysts see higher fares, less choice and fewer airports served if airline fails
By MICHAEL TUTTON - Telegraph Journal
Higher airfares, less choice and the possibility of unserviced New Brunswick airports await the travelling public if InterCanadian is allowed to disappear, industry veterans argue.
InterCanadian, an independent, Montreal-based company that serves small cities in Quebec, Ontario and Atlantic Canada, feeds its larger partner Canadian Airlines International.
It suddenly withdrew services over the weekend, leaving passengers stranded amid speculation that the airline - Canadian's largest regional partner - was in financial trouble.
In a press conference yesterday, it announced that flights would remain grounded while the company attempts to restructure.
Air Canada is offering to purchase Canadian Airlines International and has made no provisions to keep InterCanadian flying if its bid is successful.
Ken Rowe, former owner of Air Atlantic, the regional airline that preceded InterCanadian, says it's unlikely that InterCanadian will regain passenger confidence after its sudden withdrawal of service over the past weekend.
"It is very expensive to close an airline down and start it up a few days later . . . You end up flying around for days on your schedule with no passengers on board. Even if you gain your business back, you've lost millions. I tend to feel that game is over."
Craig Dobbin, the founder of Air Atlantic, the predecessor to InterCanadian, says that if there is no competition for Air Canada or its subsidiary Air Nova, "it would mean totally devastating airfares for the travelling public of Atlantic Canada."
Louis Giollereto, a marketing professor at McGill University and president of airline consultants Stowe and Breton Ltd., says that if InterCanadian stops flying it could also mean that airports like the Miramichi, exclusively serviced by InterCanadian, could be faced with a situation where no airline agrees to take over.
"I wouldn't be surprised to see reduction of services to a number of airports, including the Miramichi," said Mr. Giollereto.
"The Air Canada team has won and they aren't obliged to pick up routes that weren't profitable."
Air Canada recently made an offer to Canadian Airlines' shareholders, which made no mention of provisions to keep InterCanadian flying.
Joe Randell, president of Air Nova, says there's little reason to worry about a monopoly.
"If we're not servicing the markets properly, then other carriers will come in," he said in an interview.
"We've had a number of monopolies in the marketplace in Atlantic Canada . . . Sydney and Yarmouth are monopolies and we make the same seat sales available and we have increased service."
Asked if Air Nova will increase prices, Mr. Randell says that he believes the federal government will regulate prices more carefully if his airline gains a monopoly.
"Perhaps we should have the Canadian Transportation Agency [the federal aviation regulator] be able to regulate prices if there's a public complaint," says Mr. Randell.
However, he offered no guarantees that Air Nova would take over InterCanadian's flights to Miramichi and Charlo should the airline withdraw service.
"The fact of the matter is that in northeastern New Brunswick, there are three airports and it is a small marketplace," he says.
"I have some very serious concerns about the stand-alone financial viability of some of these airports," he said.
Mike Wally, manager of business development at the Moncton airport, also predicts airline price hikes if no competitor is found for Air Nova.
He says that is the pattern across North America when one airline dominates.
"Without competition operators aren't as aggressive in how they handle the system."
If InterCanadian stops flying, it will also damage Mr. Wally's plans for expanded service to New England.
Mr. Wally and Skip Cormier, manager of the Saint John airport, had been proposing to InterCanadian that it begin a flight from Moncton, via Saint John, to Boston.
"That idea is obviously going to be on hold," says Mr. Wally.
InterCanadian also recently put on hold a plan to purchase six new 50-seat regional jets, blaming the uncertainty facing the domestic airline industry.
Mr. Wally says it's time for the federal government to come up with some policy to foster competition in the region with a new carrier.
He suggests changing Canadian laws to permit more than 10-per-cent ownership of Canadian carriers.
Bill Casey, the Conservative Transportation critic, says that the federal government's decision to permit bids for the takeover of Canadian Airlines has created a "chaotic" situation in the airline industry.
"We don't have government policy on any key issues. We are going through this thing with absolutely no policy," he says.
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