Air Canada a blueprint for airline industry?

For his frequent trips to Canada, Tom Burke, a Dallas-based consultant, no longer worries about sky-high charges for changing his plane reservation, booking too close to his trip or booking during a peak travel season.

Burke last year paid Air Canada a flat $6,858 for 20 flights between eastern Canada and many of the 53 U.S. cities where the carrier operates, including his home airport, Dallas/Fort Worth. That means each round trip costs $686 no matter when Burke takes it during the 12-month life of the deal. He's eligible for free upgrades to business class, and he can book the trip up to one hour before flight time, and change or cancel without penalty.

"A couple of times (before buying the pass), I got socked with significant increases in fare because I changed the (travel) date," Burke said recently at the Toronto airport.

Selling bulk travel to individual customers is just one of a half-dozen innovations by Air Canada in recent years that have U.S. rivals glancing northward to monitor their acceptance by travelers. Once a lumbering money-loser, it's now a profitable pioneer, finding new ways to sell passengers only the services and amenities they want and nothing more.

With Air Canada, a traveler can, for example, cut fares by agreeing to leave a suitcase at home or by forgoing loyalty points. Or the traveler can choose to pay more for reserving a seat. In short, Canada's biggest and oldest carrier is showing its U.S. competitors a new way of doing business that could become the future of air travel.

Since the travel bust earlier this decade, Air Canada, the world's 13th-biggest airline, has broken from the pack of big airlines by focusing on customers rather than deep cost cuts, says Perry Flint, editor-in-chief of trade magazine Air Transport World.

"Very few airlines tackled the idea of trying to persuade customers that airlines deliver value for money," Flint says. Air Canada has achieved that largely by unbundling fares on its website so customers have no longer been forced to pay for things they haven't wanted, says Flint, whose publication awarded Air Canada its 2007 Airline Industry Achievement Award for Market Leadership.

Flint says major U.S. airlines, for now, are reluctant to adopt Air Canada's approach largely because of the financial risks if they prove to be a flop with their passengers. "The herd mentality means that no one wants to move first," Flint says.

Peter Belobaba, an airline pricing expert at the Massachusetts Institute of Technology, agrees that Air Canada is ahead of the pack among North American airlines. "More than any other U.S. legacy carrier, they've been willing to try innovative ideas," he says.

Sept. 11 impact

Like the U.S. airlines, Air Canada grappled with the travel downturn following the 9/11 terrorism in 2001. And, like U.S. rivals, Air Canada lost domestic business to a discount rival, WestJet.

In 2003, Canadian travel sank when the SARS outbreak scared travelers. That year, Air Canada began an 18-month, top-to-bottom restructuring under bankruptcy-court protection.

Lately, the outlook has brightened. The company earned $171 million last year and is expected to improve on that this year. It also has restored its workforce to 23,000, about the level before the travel downturn.

Some of what travelers are seeing as a result of the restructuring:

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