How Air Canada's Dreamliner could change Canadian air travel

Air Canada is staging an elaborate show-and-tell Tuesday to unveil the first of its new fleet of 787 Dreamliners, a state-of-the-art plane that it says will deliver a more comfortable ride — but probably not a cheaper one, according to analysts.

While the aircraft offers greater passenger comfort and enables Air Canada to provide more direct flights to less-populous international destinations, aviation analysts say the 787's much-lauded fuel efficiency is unlikely to translate into lower ticket prices.

What this is likely to do is possibly allow Air Canada to offer more options to consumers, but we shouldn't expect to see fares fall anytime soon.- Ambarish Chandra, Rotman School of Management

"What this is likely to do is possibly allow Air Canada to offer more options to consumers, but we shouldn't expect to see fares fall anytime soon," says Ambarish Chandra, a professor at the Rotman School of Management at the University of Toronto.

Air Canada has ordered 37 Dreamliners — at a total cost of $6 billion — and says it will bring six of them into service by year-end. It will take possession of the rest by 2019.

Built by Boeing, the Dreamliner can seat between 210 and 325 passengers depending on the configuration. It is made with carbon-fibre composite materials and features a sophisticated electrical system. According to Air Canada and Boeing, the 787 is quieter, lighter and 20 per cent more fuel efficient than similar-sized planes, and has up to 45 per cent more cargo capacity. 

Boeing unveiled the Dreamliner to the public in 2007, and in 2011 Japan's All Nippon Airways became the first airline to fly it.

Over the next two years, a number of Dreamliners experienced mechanical failures, prompting regulators in January 2013 to demand the aircraft be grounded until the issues were addressed.

Boeing made changes to the aircraft’s systems, and this March, the U.S. Federal Aviation Administration deemed it safe to fly.

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Despite the Dreamliner's troubled past, the aircraft has been described in near-rapturous terms. Wired magazine deemed it "impressive," while the tech site Engadget said it "it will change the way we fly for decades to come."

Compared to other aircraft in its class, the Dreamliner features roomier seating, more overhead space and bigger windows, which can be darkened with the touch of a button. As well, the 787's cabin air can carry more humidity and be pressurized to the equivalent of an altitude of 6,000 feet — not 8,000 feet, as on most similar aircraft — which "should mitigate jetlag," says Air Canada spokesman Peter Fitzpatrick.

"It's a superior product from the viewpoint of the passenger experience," says Karl Moore, a professor at the Desautels Faculty of Management at McGill University and an aviation expert.

Range and capacity

One of the main reasons Air Canada invested in these aircraft is to be able to offer point-to-point service to mid-size destinations such as Tel Aviv and smaller cities in China and India, says Moore, who recently travelled on a 787 flight with LOT Airlines from Warsaw to Toronto.

He points out that Air Canada has a bigger plane in its fleet — the 777, which carries over 400 — but it hasn't been able to fill it to capacity on those routes, which makes the flight less economical for the airline.

The Dreamliner is crucial for Air Canada, "because it offers the long-range yet mid-size seating capacity that is perfect for a market of Canada’s size," says Fitzpatrick.

Moore says that being able to give consumers in cities such as Montreal and Calgary the ability to fly directly to international destinations without having to travel through a hub like Toronto and New York is very appealing.

Isabelle Dostaler, a professor of management at Concordia University, says that the Dreamliner is a "prestige" acquisition for Air Canada that will also attract travellers who simply want to fly it based on its reputation.

Fuel efficiency

Part of what will allow the 787 to travel so effortlessly between far-flung destinations such as Toronto and Tel Aviv is its fuel efficiency.

Besides boosting the aircraft’s range, this will be a major boon to Air Canada's bottom line, since jet fuel is among the greatest costs for any airline. But the savings probably won't have a palpable effect on fares, says David Carr, a columnist for Wings, a trade magazine for the Canadian aviation industry.

"There are always so many balls in the air when you're dealing with pricing," says Carr.

"Yes, [the Dreamliner] is more fuel efficient, but the price of fuel is also going up and the Canadian dollar is going down. I don't see any great drop in air-ticket prices for a long time."

Canada actually has some of the highest airfares in the world, says Rotman's Chandra, who has done extensive studies on airline pricing. He says his research shows that as a result of steep prices, Canadians fly less than people from other countries.

One of the reasons fares remain comparatively high is a lack of competition, says Chandra. Westjet is arguably Air Canada's biggest rival, but it's more of regional carrier.

Air Canada and its partners in the Star Alliance control most of the longer-haul routes, says Chandra.

"If you live in Canada today and you want to fly either domestically or … to the U.S. or internationally to Europe, you're so heavily reliant on Air Canada or its partner airlines that basically they're like a monopoly," says Chandra.

He adds that successive federal governments have shown a bias in favour of Air Canada, and have deliberately stifled competition from domestic and foreign carriers.

Several years ago, Dubai-based Emirates Airlines tried to increase its service to cities such as Toronto, Calgary and Vancouver. The Canadian government stepped in, however, and blocked the proposal, arguing there wasn't enough demand.

Chandra calls the decision "a clear sop to Air Canada and its Star Alliance partners, basically Lufthansa, because they were worried that Emirates would siphon away" their business.

While she acknowledges that commercial flights in Canada aren't cheap, Dostaler points out that Canada's low population density and long distances make operating an airline — a low-margin business to begin with — even more challenging.

The Dreamliner offers some economic advantages for Air Canada, but buying 37 of them is still a huge expense, she says.

"We like to dislike airlines," says Dostaler, "but it really is a tough business to manage."