Canada tour operators dip on Air Canada report

Tue Apr 12, 2011 12:55pm EDT
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VANCOUVER (Reuters) - Shares of Canadian tour operators fell on Tuesday following a report that Air Canada Inc plans to launch a discount service to fly to popular holiday destinations.

The Globe and Mail said Air Canada, the country's biggest carrier, is drawing up a business plan to launch a budget arm to compete with Transat AT Inc and other carriers on routes to Europe, Mexico, the Caribbean and other vacation spots.

An Air Canada spokeswoman declined to comment on the newspaper report, which gave its source as a letter attached to a recent tentative labor agreement between the airline and its pilots' association.

Shares in Transat, Canada's biggest tour operator, fell as much as 4.7 percent on the Toronto Stock Exchange to C$11.33. Shares in WestJet Airlines Ltd, which is Air Canada's biggest competitor and also runs a vacations business, slipped 1 percent to C$14.10.

Air Canada's stock was 3 percent higher at C$2.35 on the Toronto Stock Exchange.

"If Air Canada were to go ahead with a more discount leisure-focused airline, the investment community might be having some concerns about that and its impact on Transat," National Bank Financial airline analyst Cameron Doerksen said.

"Transat already effectively competes against Air Canada so it's not that huge a change. It is hard to say, knowing virtually none of the details of Air Canada's plan and if it's going to go ahead," he said.

The newspaper report did not give any timetable for the budget carrier.

It said Air Canada's low-cost carrier (LCC) plan is to start with four Boeing 767s and six Airbus A319s, with the potential to increase that fleet to 50 aircraft.   Continued...