Is the age of ultra low-cost airlines finally coming to Canada? Two new startup airlines hope so, but if history is any indicator, they’ll have an uphill fight making Canada an affordable airline market.
Two new discount carriers, one based in Calgary the other in Vancouver, are promising to cut the floor out from Canada’s two major airlines, Air Canada and Westjet, with much lower prices.
Jet Naked, based in Calgary and headed up by WestJet co-founder Tim Morgan, says its fares will be at least 40 per cent lower than Air Canada and Westjet, according to the National Post.
For the basic ticket price, passengers will get nothing more than a seat on an airplane. For additional fees, they will be able buy carry-on space, luggage space, drinks and meals.
Part of the airline’s strategy is to convince Canadian “cross-border fliers” who travel from U.S. airports to fly from a Canadian one instead.
The airline has already put together a fleet of three Boeing 737s, and has hired a private equity firm to help it raise $30 million to $50 million, CH Aviation reports.
Executives are vague on where exactly the airline will fly, saying they plan to remain “flexible” and may even choose a city other than Calgary as its base.
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Meanwhile, Vancouver-based Canada Jetlines is also promising to undercut the big players. An investor briefing from last year estimated a ticket from Vancouver to Prince George, B.C., would cost $72 on Jetlines, compared to $144 on Air Canada.
It plans on flying to what it sees as underserved markets in western Canada, such as Regina, Edmonton and Winnipeg.
Jetlines has delayed its planned launch to the spring of 2015, citing last year’s bad winter. But the airline got a step closer to reality this week, announcing a plan to get listed on the TSX Venture Exchange by way of a reverse takeover.
It's Not Easy Being Cheap
Canadian airfares are infamously high. The World Economic Forum ranked Canada 125th out of 139 countries on affordable airfares in a survey several years ago. By one estimate, ticket prices are as much as $120 higher in Canada than the U.S., on average.
Many airlines have balked at flying to Canada because of the costs involved. New York-based JetBlue, for instance, received a license to operate in Canada in 2007, and still hasn't launched any flights. And previous efforts at launching low-cost carriers in Canada have failed. JetsGo lasted four years before it folded in 2005, and Canadian-British Zoom Airlines lasted less than a year before folding in 2008.
Some of the costs involved are things low-cost airlines can do little about, such as airport fees. Toronto’s Pearson Airport was North America's most expensive airport to land at several years ago, and still is among the most expensive. A 2011 study found it costs nearly twice as much to land an airplane at Pearson as it does in Tokyo or Frankfurt.
AltaCorp Capital analyst Chris Murray told the National Post it’s no easy thing to make a low-cost carrier work. Planes have to be full in order to make a profit, and “in a small market like Canada, how much traffic are you really going to get?”
CORRECTION: An earlier version of this article incorrectly stated that Cathay Pacific and El Al do not fly to Canada. Both airlines have flights to Canada.