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Montie Brewer, Executive VP Commercial, Air Canada

Jan 1, 2005
2005 / December-January 2005

Global Traveler: Air Canada recently became the first full-service airline to eliminate Saturday night stay and round-trip restrictions. What prompted this move — and other Air Canada initiatives toward simplifying fares?
Montie Brewer: Two factors. First, we finally realized that our old pricing structure with all those classic restrictions was confusing and did not provide customer value. Second, the ongoing financial crisis facing the airline industry obliged us to try something different. We either had to morph or die, and we chose morph. We have spent the last year and a half restructuring the airline, reducing costs and improving efficiencies. We have eliminated almost $7 billion in debt from our balance sheet, including capitalized operating lease obligations, giving us the best balance sheet and making us the most financially stable of all the legacy airlines operating in North America. Now we’re in a strong position to compete with low-cost carriers, and to do that we have chosen a new business model which is customer-driven and based on simple, transparent, user-friendly fares. Enforced Saturday stay-overs and return fares are the bane of air travelers and the last vestiges of old-style airline pricing. We’re delighted to get rid of them and stop telling customers where to spend their weekends. Now there’s no minimum stay required and no need to fly round trip to get Air Canada’s best fares in continental North America.

GT: How does this new model differ from the old approach to selling fares?
MB: Legacy airline pricing hasn’t really changed in 20 years. When the industry was regulated, there were two fares: first and coach. When the industry was deregulated, there was more competition and more empty seats. Airlines had to come up with a plan to sell unsold seats without eroding their revenues. The answer was a “supersaver” fare, and the restrictions were a seven-day advance purchase and a Saturday night stay. That was basically the first fence put up to prevent highfare customers from getting access to lower fares. The rest, as they say, is history. The industry has spent two decades erecting more and more fences to stop people from buying the fare they want at the price they want to pay. Now, we’re turning this model on its ear by allowing consumers to see all the fares available on our Web site and choose the fare they want. So there are no more fences. It’s a drastic change and a huge risk. We’re challenging ourselves to show consumers that there is inherent value attached to each of our five fare types, depending on the type of journey you want to take and the attributes you need.

GT: Now that you’ve simplified fares, what’s next?
MB: One of our key objectives is to reinforce the price-value relationship attached to each of our five fare types. As we go forward, we’ll look for ways to show greater value and greater differentiation attached to the different fares. On top of that, we’re going to find other added-value features that customers might be willing to pay for like seat assignment, movies and so on. You can also look for us to roll out the simplified pricing model onto the international routes at some point in the future.

At the same time, we’re reinvesting in the hard specs of our product. In 2005, we’re going to introduce a new in-flight entertainment system that will bring all our customers throughout the cabin leading-edge video and audio on demand with personal television screens at each seat. We’re also going to introduce lie-flat seating for all of our Executive First international customers.

The key to all these initiatives is a vital imperative to be more customer driven. We used to talk about it a lot, but now we’re actually practicing it, and that change is driving us to be more innovative in all areas. Pricing is just the beginning.

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FX Excursions offers the chance for once-in-a-lifetime experiences in destinations around the world.

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