Taking inspiration from KLM's hub structure in Amsterdam, Air Canada is positioning Toronto Pearson International Airport as North America's next global hub. Despite a relatively small home base, KLM operates 132 destinations from Amsterdam's Schiphol airport. This is driven by sixth freedom flow traffic, or connecting passengers, who account for 70 per cent of KLM's international passenger volume. Similarly, excellent geographic positioning makes Toronto Pearson ideal for passengers transiting between South America and Asia, and on North America-Asia/Europe routes. As Canada's biggest airport and among the largest in North America, it generates the second-largest international passenger traffic in the region. Toronto's stature as Canada's largest city and financial powerhouse supports this. It is home to 5.5 million people across the Greater Toronto area alone. "We have a great local base that drives the demand," says Benjamin Smith, Air Canada's executive vice-president and chief commercial officer. "Toronto is one of the largest cities for Asian expats, and we have a lot of links with Asia that gives us a fantastic base to grow the home market." Air Canada has dedicated transborder and international Maple Leaf lounges at Toronto Pearson. From there, it operates up to 380 daily flights and serves up to 136 destinations worldwide. United States-bound passengers get their baggage checked through, while US pre-clearance is automated for some 5 million US and Canadian passport holders. They simply insert their passports into a kiosk, respond to the declaration questions and finalise the entry and inspection process with a US Customs and Border Protection (CBP) office right there. Automated Passport Control (APC) at Toronto Pearson, a joint undertaking of CBP and the Greater Toronto Airports Authority (GTAA), began in December. APC use in airports has generally led to a 36 per cent decrease in average wait times, based on CBP monitoring. "If you are a normal business person, 9.5 times out of 10 you shouldn't have to retrieve your bag," Smith says. "This is a huge advantage over going through the US. It saves time, saves stress. You don't have to worry about it, and it's all done in one building here in Pearson." The experience would be much easier for US and Asian businessmen than connecting from New York or Chicago to reach inner cities in the US. Likewise, going through California tends to be time-consuming. Air Canada is well-positioned for this market because of its reach. It has 11 flights a day from Canada that serve five points in Asia - Seoul, Beijing, Shanghai, Hong Kong and Tokyo - with frequencies increasing every year. "We want to capture a greater share of the US market, as it will drive a lot of the growth we're looking for," Smith says. As the largest foreign carrier flying to the US, Air Canada has invested in this aspiration. It flies to almost 60 points in the US and has attracted a bigger share of passenger traffic to Asia. For instance, it flies the Boston-Toronto route eight times a day because of scant Asian connections offered in Boston. Travel time is also shorter through Toronto than through Chicago. "Flights to Asia will cross the North Pole on their path," Smith says. "So if you live in the eastern part of the US, you will fly over Toronto. If the ground time is the same as in Chicago or New York, you're still going to save time because you're not going out of the way in most cases." Air Canada is the only airline that serves all three major New York-area airports from Canada. It has three daily flights between Toronto Pearson and New York's John F. Kennedy International Airport. To serve increasing traffic from New York's LaGuardia Airport, the airline fields 14 flights a day to and from Toronto, making this route an important option for business travellers going to Europe or further on to Asia. Overall, Air Canada operates 38 flights a day to the New York metropolitan area from Toronto, Montreal, Ottawa, Calgary and Vancouver. "There's strong liberalisation in terms of air rights between Canada and most of the Asian countries, so we have the added advantage that a lot of US carriers don't have," Smith says. "We still have the ability to add service, frequency and capacity to most of the markets." For instance, as Canada's flag carrier, Air Canada can double flight frequencies to China and add more destinations on the mainland without the need for bilateral negotiations. Given its approved destination status with the central government, Canada is doubly attractive and accessible to many investors and tourists from the mainland. Asian airlines reaching capacity limits on flights to the US could also explore partnerships with Air Canada to fulfil rising demand in this segment. Flight frequencies between Hong Kong and Canada can be quadrupled should the need arise. Additionally, Air Canada rouge, a new leisure airline, serves 23 holiday destinations in Europe, the Caribbean, Mexico, Florida, Las Vegas and Central America. Air Canada's partnership with United Airlines and Lufthansa gives it the home advantage in Europe and the US. The three airlines' co-ordinated approach on pricing, inventory management and fleet deployment has successfully tapped the increasing demand for a seamless travel experience. With additional partners such as Austrian Airlines, Brussels Airlines and Swiss International Air Lines joining the venture, the possibilities are endless. "To most business people, it comes down to, 'do you go where they want to go and when they want to go?'," Smith says. "With Air Canada, they have the comfort of knowing that their expectations will be met." Inspired by a 21 per cent increase in sixth freedom US traffic at Toronto Pearson, the airline is partnering in a big way with the GTAA on making the airport much more transfer passenger-friendly. It entered an enhanced commercial agreement with the airport authority in October last year that commits both parties to passenger service improvements such as baggage delivery and aircraft de-icing wait times. Building on a leading brand It is clear that Air Canada's international growth is driven by major investments in route and fleet expansion. The delivery of Boeing 777s last year marked the first significant wide-body expansion in 10 years. With the overlapping availability of 37 Boeing 787s until 2019, Air Canada attains a lower cost structure due to the increased number of seats and in the case of Boeing 787s, the added benefits of improved fuel efficiency and lower maintenance costs. About C$1.5 billion (HK$10.6 billion) has been invested towards offering more than 43,000 seats on Asia-Pacific routes per week. These include three weekly flights on a new Toronto-Seoul route, 10 weekly flights from Toronto to Beijing, and 11 weekly flights on the Vancouver-Beijing route since June last year. The airline also began deploying its new Boeing 777 in November last year on the Vancouver-Hong Kong route. With Dreamliner service from Toronto to Tokyo-Haneda starting in July, Air Canada will be operating the most flights between Canada and Japan. Starting this summer, nonstop service from Calgary to Tokyo-Narita will be increased from three times weekly to daily, just like on the Toronto-Narita and Vancouver-Narita routes. The new Toronto-Haneda route is ideal for business travellers because the airport is just 30 minutes from downtown Tokyo. The airline's goal is to add 1.1 million international passengers per year from its Canadian hubs. This will be achieved through increased frequencies of Boeing 777 and Dreamliner service to Asia, gradually replacing the 767s being used. Meanwhile, the 767s will become the standard aircraft for Air Canada rouge's leisure destinations, with some Boeing 777s also coming into service during peak season. As the natural gateway to the Pacific, Vancouver remains integral to Air Canada's international growth strategy. It is the base for nonstop services to Hong Kong, Beijing, Shanghai, Seoul, Tokyo and Sydney. Through a code-share agreement with Air China, six secondary destinations on the mainland are also within reach from Vancouver. The upcoming peak summer season will see more flights between Vancouver and Asia, particularly daily service to Seoul instead of four weekly, and more seats to Tokyo with the expected delivery of five new Boeing 777s and three new Boeing 787s. Air Canada rouge service from Vancouver will also start within the year. The target is to raise capacity from 23 to 40 routes by the end of the year, with 50 aircraft to be deployed by next year. "Growing Air Canada into an international global carrier is one of our top priorities across the whole corporation," Smith says. "We are incredibly delighted to invite the world of opportunities to and from Canada. Looking at the assets at our disposal and the opportunities that lie ahead, we are excited to help shape the future of air travel from a North American perspective. Hearing from customers who are experiencing what we offer and what we envision gives us all the confidence." Air Canada www.aircanada.com
