It’s a good time to be in the market for plane tickets.
The country’s two biggest airlines, Air Canada and WestJet, are turning to an “unusual amount of creative promotions” to sell tickets, experts say, as economic conditions remain soft in many regions while both carriers continue to ramp up the number of seats they offer.
Airline experts at financial services firm Raymond James who track ticket prices say their fare index for WestJet and Air Canada fell 11 per cent and 5.2 per cent last month, respectively, following similarly sized declines in September.
The pricing pressure comes as the airlines offered somewhat novel discounts to boost ticket sales. “Anecdotally, we have seen both carriers announce an unusual amount of creative promotions,” the brokerage’s analysts said.
Air Canada has been selling “Buy 1, Get 1 50% Off” vacation offers as well as bonus credits for flight passes, the experts said. WestJet meanwhile has been promoting airfares for its Plus service at 25 per cent off.
‘Anecdotally, we have seen both carriers announce an unusual amount of creative promotions’
The discounts are a reflection of the growing number of seats and routes each carrier is adding in a bid to expand their businesses and take more market share from one another as well as from international carriers that connect with Canadian cities.
And consumers are the direct beneficiaries of the showdown.
“This aggressive level of capacity growth continues to manifest itself in the fare discounts that we have observed,” Ben Cherniavsky, Raymond James’ transportation stock analyst said.
The airlines’ saving grace has been plummeting oil prices, which have cut operating costs dramatically by lowering jet fuel costs – the single biggest expense for an airline.
When WestJet and Air Canada report their latest financial numbers later this week, experts say the carriers should again post decent earnings despite the pressure on fares.
“We are tweaking our forecast up for both Air Canada and WestJet purely to reflect the lower than expected fuel prices,” Cherniavsky said.
The Raymond James analyst said he anticipates both carriers will state intentions to rein in capacity growth next year, “but not enough to bring the market into balance.”
So, “the showdown continues.”