CBCNEWS has reported that Air Canada decides to add $25 checked bag fee for passengers who fly within Canada, also those flying to and from the U.S., Caribbean and Mexico. The fee only applies to passengers who chose the lowest-fee ticket option. This change wouldn’t affect anyone who holds an Air Canada membership, military personnel or anyone booking with Air Canada Vacations. When Air Canada’s CFO was asked why they made such decision, he explained, “It’s what the market is bearing at this point in time.”
If looking at this move in the view of an accountant, this decision could benefit Air Canada. I think there might be an increase in the company’s revenue. But, considering “it’s what the market is” Air Canada might not find an increase in their profit. On the other hand, if looking at this action in the perspective of a marketing person, there would be an adverse effect on Air Canada. Recently, an American airline called Southwest Airline is trying to enter the Canadian Market. They are offering cheap price and high-quality service, which is attractive to people. As the service both companies provide is at the pretty much same level, people would choose Southwest Airline over Air Canada, because of the price difference. In my opinion, Air Canada’s decision of adding checked bag fee would put the airline in a disadvantageous position. Since there’s another better offer waiting for them at Southwest Airline, Air Canada might face a decrease in their demand.