Air Canada's Chief Says U.S. Policies Won't Hinder Business (1)

(Bloomberg) — U.S. President Donald Trump’s plans to cut taxes and regulations look more favorable to business than Canadian policies, according to Air Canada’s chief executive officer.

“This industry isn’t from a taxation perspective adequately competitive, we know the U.S. is about to become even more competitive,” Calin Rovinescu said.

Canadian airlines will be hurt by plans to introduce a carbon tax and may suffer if the government’s intention of privatizing airports raises costs, he said. Airport rents and landing fees in the country already rank among the highest in the world, according to a 2016 study by the Montreal Economic Institute think tank.

Canada’s biggest airline has focused its growth plans on carrying international passengers through hubs such as Toronto and Vancouver, a strategy that relies partly on smooth traffic from the U.S. While Trump has said he wants to rework the North American Free Trade Agreement and limit travel from some countries, such changes won’t hurt Montreal-based Air Canada, Rovinescu said in an interview Tuesday.

“We will be able to do a lot of business” with the U.S., he said. “My sense of the border dynamics between Canada and the U.S. is that it won’t become more complicated, indeed it may well become more transparent from a commercial perspective.”

Rail Rivals

Some of Canadian Prime Minister Justin Trudeau’s policies could benefit airlines that are hurting from taxes and fees that often account for 60 percent of a plane ticket’s price, Rovinescu said. Canada is studying increased passenger rail service around Montreal and Toronto, which could move travelers to larger hub airports, although competition for passengers might increase, he said.

“Good competition makes companies more competitive,” he said.

The CEO also hopes to improve Air Canada’s agreement with Aimia Inc., which administers the carrier’s Aeroplan loyalty program.

“We are having good discussions,” he said. “There’s no doubt that Air Canada will make some substantial gains coming out of that.”

Aimia is the biggest purchaser of seats on Air Canada, having paid the airline
almost C$700 million ($525 million) in 2015, according to Neil Linsdell, an analyst at Industrial Alliance Securities. Air Canada, which buys miles to give its frequent fliers under Aeroplan, paid Aimia C$245 million the same year, he said. 

The deal expires in 2020, and Air Canada will likely reduce the percentage of seats that it holds for Aeroplan members, Linsdell said. 

“It’s very clear to me that they are going to revise some of the terms,” he said.

Air Canada shares rose 17 cents to C$13.36 in Toronto.

(Corrects headline to remove reference to political leaders.)

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