We all know what it is like to fly with our country’s airline. The thrill of flying to a distant or close place knowing that the flight will benefit the economy. In fact, flag carriers are one of the most comfortable airlines that a country might have to offer. Let’s take Air Canada. It is the official flag bearer of Canada and it is subjected to many vigorous tests. Now, if you have flown on some cost-cutting airlines, you know the difference. Many cost-cutters do not clean their cabins and everything costs more to buy and to check in luggage. But in the new world, many cost-cutting airlines are giving close to the same service as aboard a flag carrier. In fact, many flag carriers are starting to lose A LOT of money as their service has not improved, but has dropped even. In fact, British Airways has lost some $300 million dollars in the past decade to reduced passengers and higher operating costs. Now many people say, “But Flag-Bearers are run by the government, they will never run out of money!”. Yes, that may be true, but the financial risks of running a government airline is high. In the history of Air Canada, its counterparts Canadian Airlines and Air Canada had to be joined together over fears of a financial crash for the airline and in the history of Air Canada, they have declared bankruptcy before. But when the Canadian government took over the airline, profits are up and the staff are happier than ever. In fact, Air Canada now boasts an average of 85%+ full on international flights other than the USA and Mexico. That means more money in the bank for many happy directors of the airline. On a professional note, Air Canada made a net income of $340 million CAN in 2013 according to the Air Canada Annual Report 2013. In addition to that, Air Canada has agreed to a code-share with 3 other airlines and the increase in connections from Toronto Pearson has increased by 3% in 2012. Passengers have also reported that Air Canada is the best carrier in North America and it has been that way for 5 years in a row. This accords for service, availability, and the planes themselves. In 2013, the amount of passengers travelling with our flag carrier increased by 1.9% and net profits are up by over 1%. But there is a negative side to all of this. By expanding the airline with 37 new Boeing 787-8’s, the company has acquired a net debt of 4333 million CAN. This can be a real “shocker” as the airline is doing so well. But this will all pay out as the amount of passengers are supposed to rise by 1.5% every year on most routes and on new developing routes to Europe and Asia, net increases of 4%+ are to be expected. On a side note, if you are looking into stocks as I am, I suggest an interest in Air Canada has in the past year, the stock has increased by $1.20 and possible capital return is magnificent.
“But Rolf, what should I choose? The cheaper airline or the flag carrier?” you may ask, and here is my advice. I see no reason to pay a premium for flights that are under 3 hours. You will get on the plane, and then get off. There is no need to dish out maybe 20% more than you need to. But if you are flying on long-haul flights, I suggest your flag carrier. Flag carriers have higher standards and the quality of the service is still higher. The seats are clean and the airplanes are usually larger and more comfortable than cost-cutters. It is easier to sleep on flag carriers and many offer complimentary meals unlike many cost-cutters. I always fly with flag carriers as they have a better and much friendlier surroundings and I always feel that I am supporting our national airline. But remember, the decision is all yours, cost-cutters are great, but if you want comfort, reliability, and better passenger ratings, fly your national airline.Follow @zakopinion
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