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Rouge’s success leaves Air Canada “very, very pleased”

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Rouge’s success leaves Air Canada “very, very pleased”

Rouge’s success leaves Air Canada “very, very pleased”
June 04
12:31 2014

DOHA — Air Canada continues to grow its Rouge operations and the company could not be more happy with the results and growth they’ve seen in the first year of operations. From an initial fleet position of only four aircraft the Rouge operation has expanded to more than 20, used to compete with WestJet and Air Transat in the heavily trafficked leisure markets between Canada and “sun” destinations in the USA, Mexico and Caribbean. Speaking at the IATA Annual General Meeting in Doha this week Air Canada’s Chief Commercial Officer Benjamin Smith noted, “We’re very, very pleased. It took us a while to set it up but it is a natural progression and expansion of our product offering.”

Smith focused on the competitive environment in which Rouge is operating and the fact that their largest competitors are LCCs, suggesting that the yields necessary to operate were simply not available under the mainline Air Canada structure. Yields were low and the company needed a different approach to continue operating in those areas, “In the leisure market we weren’t getting an adequate yield; If customers are going to compare it to mainline that wasn’t a sustainable model.”

Of course, it is a different product with a different passenger experience on board, even though some of the other aspects of the travel experience are similar to mainline operations. This is a challenge for the company but one they are trying to minimize through customer communications and, from time to time, altering their marketing approach with the product. Rouge flights are still considered to be part of the Star Alliance group, for example, which means that benefits for frequent flyers such as lounge access or baggage allowances are still honored. Other things, like clearly positioning the premium cabin on Rouge as a Premium Economy rather than a Business Class, are a bit more challenging, but Smith says the company is constantly working to reduce the confusion there, “We have to make sure that the expectations of the product is set so that the customer knows what they’re getting and we’re evolving on that, getting as good as we can.” The premium economy aspect of the offering will overlap into the mainline operations in the near future as Air Canada adds that cabin to some of their long-haul fleet starting later this year.

The company is also willing to admit that they didn’t always get things perfect with the Rouge launch. Tying the new flights into the loyalty program was, initially, a very different structure. That was confusing for passengers and it is something the company switched (though arguably at the expense of earning rates on some mainline routes, as well). And Smith acknowledges that there may be more changes to come as they evolve the Rouge offering, “We’ve done a lot of course corrections. We listen to our customers and we realized that [mileage earning] was going the wrong direction and we had to get it right.”

While some markets – the Caribbean, for example – are easy to see as more leisure-focused there are others such as Los Angeles where the passenger mix is not as clear. This presents a challenge for Air Canada as they introduce Rouge into the market. Flights to Toronto and Montreal are remaining mainline while Vancouver and Calgary are switching to Rouge. Smith admits that such a split can be “very difficult to explain” to customers but also insists that it is a necessary shift. He described the yields in the Vancouver-LA market as “not that exciting” which drove the decision to switch the operations.

There is still much growth to come in the Rouge route map. The fleet is expected to grow to 50 aircraft in the next few years, allowing the company to both add routes and also swap out some existing mainline services. And, for better or worse, the general trend in mainline economy class service is towards the fee-laden option once reserved for only the LCCs. Customers have indicated that they’re willing to accept that level of service at a certain price point. More and more that’s what is being sold and that’s what customers should continue to expect, especially in markets highly focused on leisure travelers.

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Seth Miller

Seth Miller

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