Improving yields for WestJet and Air Canada should continue into 2011, says analyst Cam Doerksen.
The return of business travellers, fuller planes and rising ticket prices meant a better year for the country's airlines, but industry watchers say emerging from the recession's lows was still a slow climb in 2010.
However, most anticipate that recovery hitting a faster pace in the new year.
"I would sort of characterize 2010, probably for both WestJet and Air Canada, as really sort of a slow recovery off a pretty bad year," said analyst Cam Doerksen, of National Bank Financial.
"Things have slowly improved.
"Things are certainly moving in the right direction through the year and that bodes well for 2011."
After a shaky 2009, when the number of people flying dropped steeply, the 2010 results were an improvement, even if they were increasing at a pace below predictions.
Both major airlines - WestJet and Air Canada - increased the number of seats available for sale and still saw fuller planes on average than the year before.
"Travel demand is slowly picking up and I think that's clearly a good sign that the rebound is sustainable," Doerksen said.
Also during the past year, WestJet saw an abrupt change in leadership, with Sean Durfy moving on and Gregg Saretsky taking over.
The Calgary-based carrier has also announced a run of new partnerships - including its first code-sharing deal, with Cathay Pacific, and a first U.S. partnership, with American Airlines - as well as introducing self-tagging kiosks for checked bags and its own rewards program.
Karl Moore, a professor at McGill University's Desautels Faculty of Management, said with Air Canada posting better financial results and WestJet resolving troubles with its reservation system, the industry's future looks good.
"Despite the considerable increase in capacity, particularly WestJet, the load factors, the number of passengers on the planes, has gone up fairly well," he said. "With an improving world economy, I think it should be a very strong, solid year for the industry in Canada."
He added that Saretsky seems to be a "good match with what they need these days," while Air Canada's CEO Calin Rovinescu is making positive moves to try to change the culture at the country's largest airline.
Doerksen said airline yields - the average revenue per mile per paying passenger - are also starting to slowly improve.
"The indication in the fall, in the last sort of quarterly results WestJet reported, and I think confirmed basically by Air Canada, is that they are seeing improvement on the pricing side," Doerksen said. "Once you start to get business travellers back on the planes, that's what really tends to drive the yields and if that continues I think that'll be good for both airlines.
"The yield momentum that we're seeing is probably going to continue into 2011."
The International Air Transport Association, reporting on the first 10 months of the year, found business and premium travel worldwide is up at an annualized rate of seven to eight per cent. Economy travel is three per cent over pre-recession highs, it stated.
But a stronger airline industry isn't always good news for passengers. Improvements in pricing for the airlines means the cost of tickets is rising - although analysts point out they're still not back to the prices of the boom years - and Canada's two major carriers will begin charging for a second checked bag in January.
However, most anticipate that recovery hitting a faster pace in the new year.
"I would sort of characterize 2010, probably for both WestJet and Air Canada, as really sort of a slow recovery off a pretty bad year," said analyst Cam Doerksen, of National Bank Financial.
"Things have slowly improved.
"Things are certainly moving in the right direction through the year and that bodes well for 2011."
After a shaky 2009, when the number of people flying dropped steeply, the 2010 results were an improvement, even if they were increasing at a pace below predictions.
Both major airlines - WestJet and Air Canada - increased the number of seats available for sale and still saw fuller planes on average than the year before.
"Travel demand is slowly picking up and I think that's clearly a good sign that the rebound is sustainable," Doerksen said.
Also during the past year, WestJet saw an abrupt change in leadership, with Sean Durfy moving on and Gregg Saretsky taking over.
The Calgary-based carrier has also announced a run of new partnerships - including its first code-sharing deal, with Cathay Pacific, and a first U.S. partnership, with American Airlines - as well as introducing self-tagging kiosks for checked bags and its own rewards program.
Karl Moore, a professor at McGill University's Desautels Faculty of Management, said with Air Canada posting better financial results and WestJet resolving troubles with its reservation system, the industry's future looks good.
"Despite the considerable increase in capacity, particularly WestJet, the load factors, the number of passengers on the planes, has gone up fairly well," he said. "With an improving world economy, I think it should be a very strong, solid year for the industry in Canada."
He added that Saretsky seems to be a "good match with what they need these days," while Air Canada's CEO Calin Rovinescu is making positive moves to try to change the culture at the country's largest airline.
Doerksen said airline yields - the average revenue per mile per paying passenger - are also starting to slowly improve.
"The indication in the fall, in the last sort of quarterly results WestJet reported, and I think confirmed basically by Air Canada, is that they are seeing improvement on the pricing side," Doerksen said. "Once you start to get business travellers back on the planes, that's what really tends to drive the yields and if that continues I think that'll be good for both airlines.
"The yield momentum that we're seeing is probably going to continue into 2011."
The International Air Transport Association, reporting on the first 10 months of the year, found business and premium travel worldwide is up at an annualized rate of seven to eight per cent. Economy travel is three per cent over pre-recession highs, it stated.
But a stronger airline industry isn't always good news for passengers. Improvements in pricing for the airlines means the cost of tickets is rising - although analysts point out they're still not back to the prices of the boom years - and Canada's two major carriers will begin charging for a second checked bag in January.
Doerksen said there are a few things to watch in the new year that can affect airlines bottom lines.
One is the price of fuel and airport costs.
"We've had some strengthening of prices in 2010 and that'll probably be one of the more closely watched items in 2011. To some extent that's going to dictate pricing as well," he said. "There's a limit to how much they can raise the ticket price, so they need to find other ways to generate the revenue."
Doerksen said 2011 will be the first time in the past few years that domestic capacity will be stable, with airlines not adding a significant number of new flights within the country.
"For the most part they're putting all their capacity into their sun destinations and transporter markets," he added.
"I think the lesson that we've seen south of the border is the airlines can get pretty significant profitability improvements if they don't add much capacity, or cut capacity, and I think that's something the airlines in Canada have noted.
"And certainly it's in their best financial interests to keep capacity growth at a pretty reasonable rate."
WestJet shifted three planes scheduled to arrive next year and in 2012 to 2017.
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