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Canadian airlines boost seats to sun destinations, but Boeing grounding a 'wildcard'

Alicja Siekierska
General view of the beach at the Club Med Punta Cana vacation resort in the Dominican Republic, February 29, 2016.   REUTERS/Charles Platiau
General view of the beach at the Club Med Punta Cana vacation resort in the Dominican Republic, February 29, 2016. REUTERS/Charles Platiau

Canadians looking to escape the winter blues and head south for a vacation are in luck.

Canadian airlines are boosting the number of available seats to sun destinations, according to a National Bank Financial report, although it is unclear how that will affect pricing.

The report, released this week and authored by National Bank analyst Cameron Doerksen, looked at the seat capacity from Canada to the popular sun destination market, which includes the Caribbean, Mexico and Central America. It found that between Nov. 1 and April 30 – generally viewed as the winter travel season – seat capacity will increase by 2.2 per cent overall. However, the growth is more moderate when compared to the same time last year, when capacity jumped 8.7 per cent.

Transat will see the largest growth in terms of seat capacity this year, which will increase by 7.9 per cent over the same time last year. Air Canada is also boosting its seat capacity by 6.1 per cent year-over-year, while WestJet will see a more moderate 2.9 per cent increase. Sunwing, which is currently the largest player in the sun destination market, will see capacity grow by 4.4 per cent.

“The total sun destination market has been one of the most competitive for Canadian airlines and tour operators for years,” Doerksen wrote in the analysis.

Central America is leading the way when it comes to destinations seeing the most seat capacity growth at 16.5 per cent, followed by the Dominican Republic (10.7 per cent) and Cuba (1.5 per cent). Mexico’s seat growth was relatively flat at 0.6 per cent, while Jamaica and other Caribbean islands posted declines of 7.6 per cent and 2.2 per cent, respectively.

But what the capacity increases will mean for pricing remains unclear, Doerksen says.

“It is still too early in the season to draw any conclusions about pricing, especially given that the busiest booking period for all-inclusive vacations only begins post-Christmas,” Doerksen wrote. However, he noted that “higher capacity typically leads to lower prices and, conversely, capacity restraint facilitates pricing increases.”

Doerksen also noted that the grounding of the Boeing 737 Max aircraft is a “wildcard” when it comes to capacity growth plans. Air Canada, WestJet and Sunwing all operate the Boeing jet, with Air Canada taking it out of its schedule until Feb. 14. If the Boeing 737 Max is taken out of the winter season schedule, Doerksen noted that sun destination capacity will grow by just 0.9 per cent.

The analysis also found that Air Canada’s proposed takeover of Transat will see the airline’s share of the sun destination market jump from 25 per cent to 48 per cent. The deal is being reviewed by several regulatory bodies, including the Commissioner of Competition, which is expected to finish its analysis in early May.

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