Business

Air Canada CEO says extra baggage fees, fuel charges essential to airline profit

Airline passengers may not like paying extra to check a bag or get preferred seating — or paying the hated fuel surcharge — but none of those charges will go away soon, Air Canada chief executive Calin Rovinescu says.

Air Canada turnaround

7 years ago
Duration 9:58
Calin Rovinescu, CEO of Air Canada, on how he moved the airline toward sustainability

Airline passengers may not like paying extra to check a bag or get preferred seating — or paying the hated fuel surcharge — but none of those charges will go away soon, Air Canada chief executive Calin Rovinescu says.

The industry has spent a decade getting its customers accustomed to paying extra fees for everything from a drink on board to early check-in, he said in an interview with CBC’s The Exchange with Amanda Lang.

The margins in the airline business are so slim that extra fees have become an essential part of the business model, he said.

"The airline industry globally, all in, delivers a net profit margin of three per cent,” Rovinescu said. "This is a hyper-competitive industry, so what has gone on is [airlines] will compete on the base fares, and [customers] will add on to that, depending on what you want …."

These ancillary fees industry-wide have started to represent the lion’s share of industry profit, he added.

Rovinescu discussed the long, hard process of turning around Air Canada.

Air Canada profit soared to a record annual high of $531 million last year, and the airline has started to get a grip on its pension and labour issues, he said.

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