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Business Travel Trends and Forecasts Toronto
Westin Copley Place - September 10, 2019
New York Marriott Marquis - September 13, 2019
Air Canada's John MacLeod discusses:
Air Canada's sales team has gotten a new leader in recent weeks, as John MacLeod takes over as VP global sales and alliances. His predecessor, Duncan Bureau, is now president of Air Canada low-cost carrier Rouge. MacLeod joined Air Canada about 18 months ago as VP of commercial strategy, moving from a sales role at Virgin America. He spoke to BTN transportation editor Michael B. Baker about his plans to spur corporate business growth at Air Canada.
BTN: What is your primary focus in your new position?
MacLeod: In the very short term, my focus is, as any new leader should, meeting and getting to know the people that we will be working with. That includes not only the substantial Air Canada sales team but also those that we work with, such as corporate travel managers, key travel agents, as well as the global sales teams of our alliance partners. I was quite grateful that my senior leaders hosted a couple of parties, one in Toronto and one in Montreal, to say goodbye and thank you to my predecessor Duncan Bureau, who is now president of Rouge. That gave me the opportunity to meet some of our key partners in travel. I've been to Australia, to China and to Germany and the U.S.
BTN: Are you hearing any common themes?
MacLeod: The most consistent message I got from the corporate travel managers was what a great sales team I've inherited. I was expecting them to say "what a great product you have" before "what a great sales team," but that was the second comment. After meeting so many people, it's driven home how important these relationships are for the success and growth of our business.
BTN: How has corporate market share trended at Air Canada?
MacLeod: We've enjoyed a good position, especially within Canada, and it's growing slightly. My goal will be to grow it even more.
BTN: How will you accomplish that?
MacLeod: It's a little early for me to change the strategy. There will be a period of assessment first, not only meeting the folks but looking at their business plans. What you probably will see us do, as we get into the 2019 budget process, is revise our strategy.
BTN: It seems Air Canada has been in growth mode lately, particularly on long-haul routes.
MacLeod: There's been substantial growth of long haul. Some of that has been enabled by new technology, the fleet technology we have acquired. [Boeing] 787 Dreamliners have enabled a lot of new routes. By the end of this year, we will almost have 100 widebody aircraft in our fleet. We've been able to implement new routes such as Toronto and Vancouver to Delhi, Vancouver to Melbourne and Brisbane and Montreal to Shanghai and [Tokyo] Narita, which is the latest one for us.
BTN: Have any of those routes been strong for corporate and premium traffic?
MacLeod: Brisbane has been fairly strong, with resource-based business between Canada and Australia. We expect Narita to be very strong, with strong business ties between Japan and Canada. We have Rouge growth, as well, which tends to be leisure oriented and less interesting for business travelers, but we find they will use [it] if it's the only nonstop or the most convenient way to get there.
As we start competing with these ultra-low-cost carriers around the world, the economy product is becoming less applicable for business travelers, and they're finding the value proposition of premium economy."
BTN: What else are you doing to boost long-haul business?
MacLeod: We have a big focus on reducing the friction for customers who are connecting. We've done a lot of good work in Toronto with the immigration folks and security folks and also with our marketing team that has built a really slick connection process, including what we call the Air Canada Signature Suite, a lounge but really a pre-flight dining facility with a fabulous a la carte menu and premium cocktails and five-star table service. It's a great way to start a flight.
BTN: How is your new Premium Economy product doing among corporate clients?
MacLeod: Premium Economy is growing very quickly for us. It's growing because it's a new product and it does meet a niche. As we start competing with these ultra-low-cost carriers around the world, the Economy product is becoming less applicable for business travelers, and they're finding the value proposition of Premium Economy. Where they don't want to buy the full Signature product, they're finding Premium Economy is a good option. We have Premium Economy on all our widebody aircraft now. It's a consistent product across the fleet. It's doing quite well. We're watching the revenue numbers grow.
BTN: It's a distinct cabin rather than a set-apart section within Economy, correct?
MacLeod: It's absolutely a separate cabin on all our widebody aircraft. There are fewer seats. It's got more pitch than the Economy—38-inch pitch, typically—and fewer seats across, so you don't have the middle seats on the aisle sides. Then they get the standard amenities of priority boarding and baggage handling and upgraded complimentary meal service with free drinks and bigger TV screens and an adjustable seat with pillows and blankets and access to our Maple Leaf lounges.
BTN: Where does Air Canada stand with Wi-Fi?
of our 777[-300ERs] have Wi-Fi now, the satellite Wi-Fi. [We'll have the rest of the
widebody fleet done by the second quarter of 2019.] The only
widebodies we won't put Wi-Fi on are the 767s that are being retired next year.
Of course, the Rouge 767s will all be done with Wi-Fi.
BTN: You recently announced a joint venture with Air China. What will that bring to the corporate travel market?
MacLeod: The purpose of the joint venture was to line up our products and services. The sharing of revenue enables us to open up our networks to each other so we're not trying to protect our own transpacific revenue from our partners. What this joint venture has enabled us to do is open up more points beyond Beijing that the Air Canada flights can connect to. The same goes for Air China, which gets access to more points in Canada to connect to their Vancouver and Montreal to Beijing nonstop service. Nonstop transpacific flights become available to our corporate customers that were not before, and we are working hard to develop joint sales strategies and revenue management strategies to enable our customers to use each other's services. It's the joint venture that enables us to do that.
BTN: What's the time line for that?
MacLeod: We've signed and we expect to implement most of our joint marketing and pricing and sales initiatives by the end of the year. We have the approvals already for the joint venture.
BTN: What's happening with your other alliances?
MacLeod: We're always focused on A++, which is Lufthansa, United and Air Canada's joint venture in the Atlantic. Today, it's the only joint venture that includes Canada on the Atlantic and is the largest joint venture in the airline business. We're spending a lot of time making sure that we align our joint-venture practices and our cooperation with the changing technological environment. We're spending time on making sure we have the most competitive network across the Atlantic, and some of that is coordinating more closely connections in Frankfurt and Zurich, as well as Vienna, and making sure we can support nonstop flying for Air Canada and Lufthansa from North America to the EMEA region, which goes as far as India. The other element is: We have permission with our antitrust immunity to jointly contract our combined networks in this joint venture, so our goal is to expand our market share in the business community, and these corporate contracts enable us to do that.
BTN: What projects are underway on the distribution side?
MacLeod: We have a constant focus on distribution and looking where to streamline the distribution process and be able to offer an enhanced product to our customers. One step before [the International Air Transport Association's New Distribution Capability standard] is to launch a new reservations system. We've been hosted with our own reservations system, and we will be implementing Altea, which is Amadeus' system. Eighteen of the 27 Star Alliance carriers use this system, so it enables us to talk to those carriers in a quicker and more efficient way and be able to exchange more customer information and access each other's respective customer offerings more easily. Then, with NDC, it is key for us in the travel agency community, in the GDS environment, to ensure that we can offer ancillary products across our airlines. That's particularly important for A++, where we want to sell tickets to customers who have journeys on both partner airlines. Seat selection would be one good example.
BTN: When will you implement the new system?
MacLeod: We haven't set an exact date, but we expect it to be a minimum 18-month program. And we just kicked it off, so probably early 2020 if you base it on that. It's a big project, and those time lines are usually not very firm this far out.
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