Air Canada's Multi-Tier Ticket Lets Fliers Buy Only the Services They Want

Air Canada has "the smartest travel retail model" among big traditional airlines. "It allows the customer to buy what they value, gives the customer an extraordinary amount of control, and it helps Air Canada earn more money."


And some Air Canada-style features are showing up at smaller U.S. airlines.

In June, low-fare carrier Spirit Airlines will make baggage check-in and on-board beverages optional charges so that it could lower its own costs and keep fares low. Soft drinks and coffee now cost $1 on flights, while those wanting to check bags must pay $5 online or $10 at the airport. Columbus, Ohio-based Skybus, which is set to launch service on May 22, charges separately for an array of services from baggage handling to on-board snacks.

Air Canada has had enough visits from curious U.S. industry executives that it gives them a "canned presentation," says Sean Menke, Air Canada's chief commercial officer. On visits to its low-key, seven-building campus between runways at the Montreal airport, U.S. airline executives hear about how surprisingly few customers buy only a Tango ticket. Only about 25% of Air Canada travelers buy one with no upgrade, he says.

Menke and Air Canada CEO Montie Brewer also share findings about what customers don't want to pay for, such as $10 meals.

While Air Canada executives won't say which U.S. executives have visited, the airline's Star Alliance partner in the USA -- United Airlines -- is studying the concept of offering customers an option to choose services they're willing to pay for, says Robin Urbanski, a United spokeswoman.

Shareholders win, too

Not all of Air Canada's innovations are visible to travelers.

Milton, the ACE chairman, created the new holding company three years ago, believing that Air Canada's stock price didn't reflect its true value. The holding company has allowed the company to launch separate publicly traded companies: Aeroplan, its loyalty program; Jazz, its regional carrier; and Acts, its maintenance unit, which contracts with 100 airlines.

The spinoffs created billions of dollars in value for shareholders, Milton says. In all, ACE and its four business units -- the two airlines, the maintenance unit and the loyalty program -- have a stock market value of about $7 billion, roughly on par with American Airlines, the world's biggest airline.

Air Canada is in the midst of the biggest fleet overhaul of any North American airline. Some 130 planes are getting new interiors, including seats, power outlets for laptops and lavatories. Air Canada's 44 Boeing 767s, which are used to fly to London Heathrow, Tel Aviv, Shanghai and other distant cities, are getting cutting-edge, lie-flat beds in business class. Air Canada has ordered 37 Boeing 787 Dreamliners, the most of any North American airline.

What could be Air Canada's biggest and riskiest behind-the-scenes move won't happen until next year.

The airline is spending an undisclosed sum to replace its decades-old computer reservations system, a patchwork of mainframe computers similar to the systems that the world's major airlines continue to rely on today. Air Canada now sells 60% of its domestic tickets directly from its website, vs. more than 70% for Southwest, one of the industry leaders in that area. The more flexible Web-based system will allow the airline to develop even more inventive ways to sell its fares, says CEO Brewer. For example, it will allow customers to accumulate and spend credits from a canceled reservation or a food voucher given during a flight delay.

"As long as (airlines) sell through the traditional channels," he says, "they preclude innovation." Air Canada's

biggest cities

Last year, the carrier

earned 41% of revenue

from Canadian

flying. The rest came

from flying around

the world. Where Air

Canada has its biggest

presence around

the world:

Canada

Toronto

Vancouver

Montreal

Calgary

Ottawa

United States

New York - Laguardia

Los Angeles

Boston

San Francisco

Las Vegas

Europe

London Heathrow

Frankfurt

Paris

Rome

Munich

Latin America

Mexico City

São Paulo

Santiago

Cancun

Bogota

Asia

Hong Kong

Tokyo

Beijing

Shanghai

Osaka

Source: USA TODAY analysis

of OAG flight schedule data

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