Airline can fly high on Li's Chinese connections
As Air Canada struggles to fly out of insolvency, the question facing analysts is whether the world's 11th-largest airline can survive in the new world of smaller and more agile, no-frills carriers.
Victor Li obviously thinks that Air Canada will survive because he and his Trinity Time Investments are eager to invest C$650 million for a 31 per cent share of Canada's national airline.
But the harsh numbers that measure business success say that traffic on Air Canada fell 12.2 per cent last year from 2002 while its low-cost domestic rival, WestJet Airlines, increased its year-on-year traffic last year by 42 per cent.
Although Air Canada continues to lag behind WestJet - now the second-largest airline in the country - analysts believe that the older, lumbering airline is slowly whipping itself into shape.
Air Canada, with 40,000 unionised employees, will never get down to the slim operation of the low-cost carriers like WestJet, says Professor Karl Moore of McGill University. But the airline is doing well when compared with other national full-service carriers.
Even more enthusiastic is Rick Erickson, an airline analyst in Calgary, who believes an investor like Mr Li will give the struggling airline a balance sheet with little or no debt.
Mr Erickson believes that airlines like Air Canada cannot compete domestically with low-cost airlines but they can prosper on long-haul international flights.
In addition, Mr Erickson believes that Air Canada is particularly blessed with established routes to all the major centres in Europe and Asia.
He is particularly enthusiastic about how Air Canada might flourish as a result of Mr Li's Chinese connections.
As Mr Erickson describes it, Mr Li may be able to get Air Canada access to China's 15 or 20 cities that have populations of at least three million people each but of which few in North America have yet heard.
'I'm quite bullish on Air Canada's future,' Mr Erickson said.
