Merger in the wings

The marketing departments of Air Canada and Canadian Airlines International are keeping close tabs on negotiations that began last week to determine, among other things, how the two airlines would market themselves after the proposed merger.The merger plan, which was announced...

The marketing departments of Air Canada and Canadian Airlines International are keeping close tabs on negotiations that began last week to determine, among other things, how the two airlines would market themselves after the proposed merger.

The merger plan, which was announced Sept. 9 after months of intense speculation, calls for the creation of a new holding company to manage the operations of the two airlines.

While the proposal stipulates Air Canada and Canadian would continue to manage themselves from their existing head offices, located in Montreal and Calgary, respectively, it also calls for the new holding company to provide common services ‘as deemed appropriate.’

Denis Couture, Air Canada’s director of news services, says he expects the sales and marketing departments to be among the services placed on the negotiating table.

Couture says the committee formed by the two airlines to study the merger will look at ‘shifting marketing and sales from an Air Canada and Canadian Airlines environment to a holding company environment.’

He says other services, such as human resources, reservations and communications, are also likely to be combined within the new holding company.

Air Canada has more than 200 employees in marketing and marketing-related areas, including corporate strategy, customer service, research, pricing, and its frequent-flyer program, Aeroplan.

Air Canada’s worldwide passenger account, valued at $45 million, is handled by Marketel in Montreal. Its cargo business is handled by Auger Babeux/FCB in Montreal.

Because Air Canada is the dominant partner in the merger, it has been widely speculated the Air Canada brand identity will be the most likely to survive if it comes down to the survival of one brand identity or another.

Jack Lawless, Canadian’s director of communications, says ‘it is way too premature to get into forecasting’ how the two airlines will be marketed in the future.

Lawless says ‘this is not a done deal, we do not expect to close the deal until the end of the year.’

Ira Matathia, president of Chiat/Day/Mojo of Toronto, Canadian’s agency-of-record, echos Lawless.

Matathia says Canadian is carrying on business as usual with a seat sale in place and no plans to alter its fall or winter schedules.

Asked if the two airlines would continue to challenge each other for market share now that they have signed a merger agreement, Matathia says the airlines would continue to compete ‘but the advertising will be less competitive than it has been in the past.’

Currently, Air Canada and Canadian offer competing services throughout Canada and in parts of Europe, including the u.k., Germany and France.

The merger will permit the two airlines to relax their competitive stance against one another on internal Canadian routes, but they will continue to operate in a fiercely competitive environment on international routes, which are also served by foreign carriers.

Matathia suggests one possible outcome of the merger negotiations would be to assign one of the airlines to handle the domestic business and the other to compete on foreign routes.

Matathia says a similar compromise was reached in Australia, in which Australian Airlines handles internal flights, while Quantas Airlines is the country’s international carrier.