Air Canada, WestJet lift vacation, airfare prices as loonie falls

Prices on some vacation packages south have climbed 10 per cent in recent weeks.
Prices on some vacation packages south have climbed 10 per cent in recent weeks. Fred Lum/The Canadian Press

For a shivering, sun-deprived Canadian public, it’s a perfect winter storm that’s adding insult to injury.

Months of ceaseless ice, snow and sleet amid bone-chilling temperatures throughout much of the country has sent many frantically searching for all-inclusive retreats or flights to warmer climes.

Unfortunately for beach-bound travelers, that crush of demand combined with a downdraft in the currency in recent weeks has translated into price increases on vacation packages and airfares.

The price jumps span relatively modest increases of two per cent to as much as 10 per cent, according to expert estimates.

READ MORE: Loonie will plummet to 85 cents, bank report says 

On Tuesday, WestJet noted on a call with analysts it implemented a “system-wide” price hike of two per cent on all airfares, a move the carrier said was matched quickly by its competitors, namely Air Canada and tour operators like Air Transat.

Story continues below advertisement

Combined with new currency “surcharges” Air Canada, Air Transat and Sunwing Vacations have adopted in recent weeks, many travelers are facing at least a nine- or 10-per cent hike on the cost of their getaway plans, experts say.

“Air Canada has recently introduced a foreign exchange surcharge of $35 on Caribbean packages – which amounts to a 7 per cent increase in fares on this product,” analysts at RBC Capital Markets said in a Jan. 31 note.

READ MORE: WestJet won’t add currency surcharge, yet

And the longer the Canadian dollar remains at or below its currently depressed level (around 90 cents US), the more pressure will be felt by Air Canada, WestJet and other air travel and tourism companies to layer on additional costs, they say.

“Further surcharges or fare increases are well within the means of Air Canada,” RBC said.
Story continues below advertisement

If it’s not a foreign exchange surcharge, price hikes could come in the form of new baggage fees to help offset the costs of a falling loonie. WestJet execs said Tuesday a decision hadn’t been made on whether to implement the new charges, but it was being carefully considered.

Earlier this month, WestJet said the company’s operating costs increase by $14 million for every cent the loonie declines, most of which goes to pay for expensive jet fuel. Destination operators also pay for other related items like hotel rooms in U.S. dollars.

The Canadian loonie is trading at around 90 cents US at present, having shed several cents in recent weeks. WestJet has resisted the move to implement the currency surcharge, winning points with customers in the process.

“We don’t take price increases lightly,” Bob Cummings, executive vice-president of marketing and guest experience said. “We’ve avoided price increases as much as possible.”

But the falling dollar is forcing the carrier – and others – to move multiple levers in an attempt to mitigate their own rising expenses.

And if the loonie continues to lose ground, more hikes are likely in store.

“We will make that move if we need to,” Cummings said.