September 15, 2014 2:49 pm
Updated: September 15, 2014 3:38 pm

Air Canada expected to join WestJet in breaking out new baggage fee

Experts say WestJet's move to "unbundle" the baggage fee from the airfare will allow the airline to better compete against new low-cost air services planning to launch services in Canada.

The Canadian Press
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Will Air Canada join WestJet in breaking out new baggage fees for some customers to fly their luggage?

Investors in the country’s biggest airliner certainly think so. So do experts who follow Air Canada closely.

“With today’s announcement from WestJet, it now opens the door for Air Canada to follow suit,” RBC transportation stock expert Walter Spracklin said in a research note to clients.

“We expect Air Canada will quickly follow suit,” the analyst said. “Possibly as early as today.”

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Shares in both WestJet and Air Canada jumped on the news, though Air Canada has not said whether or not it will implement the new fee.

“We are always monitoring industry developments such as this with great interest. We will evaluate it going forward,” an Air Canada spokesperson told Global News.

Air Canada’s existing fees

Air Canada already charges a luggage fee on first bags for some trans-border flights. It doesn’t charge yet for domestic routes. “Management has been reluctant to do so on domestic routes where WestJet previously did not do so,” Spracklin said.

Among other announcements, WestJet said Monday it will begin charging $25 on the first bag of luggage checked in. Smaller regional airline Porter charges a similar fee.

MORE: WestJet announces fee for first checked bag

The new fee will apply to Econo fares for travel within Canada and between the U.S. and Canada, WestJet said in a statement.

The new fee, which comes into effect immediately for flights scheduled to depart Oct. 29 and later, will affect “approximately” one in five WestJet customers, the carrier said.

“Guests flying to any of WestJet’s international destinations including Mexico, the Caribbean, Central America and Europe may continue to check a first bag at no charge,” WestJet said.

Price drop guarantee

WestJet also said Monday it’s introducing a new “price-drop guarantee” on flights and vacation packages. The guarantee stipulates that if a customer sees a lower price on a flight or vacation package they’ve already booked, the carrier will compensate them with difference in “WestJet dollars” that can be redeemed with WestJet.

“Today’s announcements are further evidence of our commitment to our guests as Canada’s low-fare leader,” Bob Cummings, WestJet executive vice-president of sales, marketing and guest experience, said.

Low-cost competition coming

The new moves comes as WestJet braces for the possible entry of new low-cost competition.

WestJet said by breaking out the baggage fee into a separate cost, it allows the carrier to keep fares lower than they might otherwise become – providing the customer the option to unbundle the baggage cost from the ticket price.

So-called “unbundling” of costs into separate line items on an airline ticket is a hallmark of cheaper air carrier service – or the kind of service two potential operators may bring to Canadian skies.

Jetlines Ltd., a Canadian-based company, said it wants to launch an ultra low-cost service in Canada beginning next spring.

MORE: New ultra low-cost air carrier aims for spring launch

U.S. carrier Southwest meanwhile has said publicly it intends to bring service to Canada.

“It’s a very strict business model,” David Solloway, a former Canadian Pacific Airlines exec now helping run Jetlines, told Global News last month.

“The whole focus is to provide safe, comfortable jet service to Canadians at the lowest possible price,” Solloway said.

WATCH: BYOP – bring your own pretzels. That could be the new standard when discount airline ‘Jetlines’ launches in Canada next year.

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