Study of selected Pacific air services : with some implications for a Canadian carrier and Canadian air transport policy

The purpose of this study is threefold. Firstly, a working measure of the profitability realized by C.P. Air in their Pacific operations should be derived. This will be gauged through the calculation of profit indicators on each of eight route segments. With the aid of these indicators, some suggestions can be given regarding the presence and degree of cross-subsidization in C.P. Air's overall operation. Secondly, the impact of possible charter development on scheduled services should be ascertained. Uncovering the nature of the Pacific air travel market and the major trends therein will complement the discussion of this evolution. Thirdly, consideration should be given to the implications that arise for Canadian regulatory policy. In particular, reference should be made to the aviation policies set out by the Canadian Transport Commission and to the stated objective of the National Transportation Act of 1967. This will serve to highlight the areas in which regulatory inconsistencies occur and in which questions may be asked concerning the long-run development of Canadian airline companies. Cost and performance data as well as information on the general development of the Pacific air travel market was collected and analyzed. This analysis provided a basis for the study of the Pacific operations of C.P. Air. Through this progressive analysis, profit indicators were derived on a route basis. In order to assess the effect of non-scheduled operators on regular Pacific air services, a gravity-type model was formulated and tested for the years 1962 - 1968. The impact of charters was measured through the inclusion of a "dummy-variable" in the multiple regression framework. The process was further refined to include some factor analysis in order to determine the principal dimensions of demand. Using the results of the statistical analysis, selected aspects of regulatory policy were discussed. This enabled questions to be asked regarding the appropriateness of some current transport policies. It was concluded that C.P. Air was apparently realizing sizeable returns on many Pacific routes. Although it was necessary to qualify this finding, it could not be denied that profits seemed high and C.P. Air would not wish any disturbance to occur. Should charters evolve in the Pacific to a significant magnitude, it was felt a large impact would be made on C.P. Air's scheduled services. Finally, it was concluded that domestic regulatory policy must be improved. The system should encourage efficient operations domestically and reinstate the true, spirit of serving the public interest.Business, Sauder School ofGraduat