Air Canada: 787s have 29% lower costs than older 767s (before the latter’s reconfiguration)

Dec. 2, 2014: Air Canada says its new Boeing 787s will have 29% lower fuel, maintenance and per-seat costs than the old Boeing 767-300ERs being replaced.

Part of this is because the 787s seat more passengers.

But the airline has found new life in the 767s through increased density, shifting them to its low cost carrier, Rouge, which has lower labor costs and overhead. Rouge’s 767s have 30% lower CASM costs than the same airplane at mainline Air Canada.

Michael Rousseau, executive vice president & CFO of Air Canada, made the remarks today at the annual Credit Suisse Global Industrials Conference in New York.

Air Canada, which has a long history of poor financial performance, is further improving its revenue picture by reconfiguring its mainline fleet to “more competitive” seating. It’s accepted five high-density Boeing 777-300ERs with 100 more seats (458 in total) than those in its fleet, for service on high demand, coach class routes with low premium demand, such as Montreal-Paris and Vancouver-Hong Kong. Air Canada is converting older -300ERs and 777-200LRs to “more competitive configurations,” says Rousseau.

The LCC subsidiary, Rouge, currently has 20 Airbus A319s and eight 767-300ERs, all in high density configuration and all from the mainline fleet. The A319s have 23% lower CASM costs at Rouge, with higher density and lower overhead, than at Air Canada. Rouge will eventually have 50 aircraft. These are all deployed to leisure markets, such as the Caribbean and some European routes, Rousseau said there are and will be no markets in which Air Canada and Rouge overlap.

14 Comments on “Air Canada: 787s have 29% lower costs than older 767s (before the latter’s reconfiguration)

  1. AC claims Rouge is meant for leisure markets, but in actual fact they’re using them to replace mainline service as well (unless you consider Vancouver – LA/San Francisco to be leisure routes).

    I imagine the plan is to slowly eliminate mainline services in favour of cheaper Rouge flights. If I were AC cabin crew, I would not be happy with the way things are developing.

  2. Reports are that Rouge service is plain awfull, it will be interesing to see how it does over time.

    • I flew CUN-YYZ on a Rouge 763 in Y last week; apart from the lack of AVOD it was not unpleasant at all. The interiors are clean and modern as they have been refurbished; the Rouge+ premium seating has quite sufficient legroom; the food (for purchase) and drink service is same as mainline, and in line with other NA airlines; and the cabin crew was young but competent and friendly.

      Of course, individual experiences will vary.

  3. Just by moving by comparing a 8-abreast aircraft with 9-abreast seating against a 7-abreast aircraft with 7-abreast seating an improvement of 13 % is gained.

    Oh wow, and the rouge seating is as also more dense: 270/280 seats against 190/210 on Air Canada’s 767-300. Around 35 % more seats but a real business class with 3-abreast was changed against a Premium Rouge at 6-abreast.

    The term CASM is misleading. DOCASM for Direct Operating Costs ASM would be more specific and CASM should only be used for costs including all parts of the equation e.g. financial costs. Nice term to blind share holders.

  4. I think after the recent articles the B787 performance has become clearer.
    Fuel burn is close to 20% better than a vintage non-winglet B767-300ER on a long distance flight (as Boeing has proposed in 2004). The advantage shrinks if the comparison is done versus a winglet-equipped -300ER on a medium range trip, down to 12-14%.

    Cost is a different thing, and depends strongly on the individual airline: installed seats, maintenance contracts, routes.

    • “Fuel burn is close to 20% better than a vintage non-winglet B767-300ER on a …..

      Cost is a different thing, and depends strongly on the individual airline: installed seats, maintenance contracts, routes. ”

      And that’s where marketing jumps in. The 20% better fuel burn is also based on per seat numbers, often without saying so.

      The higher the seatcount, the higher the perceived efficiency. So scram in many small seats (9,10 abreast) and you’ll blow away the public with great CASM / efficiency figures.

      Sad thing is: it works. Most of the press don’t know/ aren’t that critical, even less when they / their customers/ advertisers like the outcome. (Leeham knows & is only provoking a discussion.)

  5. Air Canada is being rather misleading when they claim 29% CASM benefit from the 787. They are claiming this based on FOUR 763’s in their fleet that are configured with only 191 seats. The ~25 other aircraft that made up their 763 fleet pre-787 have 211 seats.

    In other words if you weight the cost savings over the entire fleet that will be replaced over the coming years the savings are more like 21%.

    Also interesting to note that the CASM on the 763’s converted to Rouge high-density seating with winglets appear to have a lower CASM than the 787.

  6. Air Canada has a real problem with its product right now. Take a look at these reviews from high value customers, who feel totally ripped off by AC:

    Now compare with the same plane run by American Airlines – we’re not talking legends of Singapore Airlines or Cathay Pacific – and it’s clear their customers are a lot happier:

    • You are also comparing comments on American Airlines’ new and dramatically improved flat seat business class product to Air Canada’s Economy product.

      Shocking indeed that customers would be happier in business class seats than 10-abreast in Y. This should be their favourite Business class aircraft now that American is finally getting decent business class seats. 😉

      If you take the time to scroll past the flattering comments about the Business and Premium Economy comments, you will see similarly unhappy people complaining about the back of the bus.

      • There are some comments from economy passengers but I am asking people to compare the reviews from business travelers, who have higher expectations and are paying a lot of money to support those expectations. While the high density 777’s are particularly bad, Air Canada have a policy of cramming as many passengers as possible in all new aircraft. Also Air Canada’s problems go beyond the seats, as indicated by the reviews.

        There’s a tension between maximising revenue and providing decent service. If business customers are saying they prefer Air Transat, I would say Air Canada are losing their brand.

        • AC’s new J seats (being installed everywhere except the HD 773s) are significantly better than the current J pods, and competitive with other airlines.

          Cramming more people in Y is sadly happening everywhere, 10 abreast is becoming common on 777s and 9 abreast on 787s.

        • Air Canada’s “business” passengers who are “paying a lot of money” are not the ones complaining about being crammed into 10-abreast Y seats with 31″ pitch (just like AA).

          On the 787 (which is what this thread is about), those people paying a lot of money are basically getting the same J seat that is used by Cathay Pacific or they are buying Premium Economy, which offers a much better seat (similar to domestic Business Class) and in-flight experience than American’s “Main Cabin Extra”.

          The 777 High Density currently uses the same business class seats as offered by Swiss and Austrian, and is widely considered inferior to the old “pods”. Those seats will be upgraded to the 787 business class interior in the next year or two.

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