ULCCs continue to wrestle with launch issues

For two budding ultra-low-cost carriers (ULCCs) in Canada, the key ingredient to gaining consumers’ attention appears simple enough–vastly discounted airfares.

Boeing 737
Although Jetlines plans to launch with Boeing 737s (shown), the airline is also considering Bombardier’s C Series jet. Boeing Photo
Advertisement

But translating the theory into reality has been difficult for Vancouver-based Canada Jetlines Ltd. and Calgary-based charter operator Enerjet.

In theory, cheap domestic ticket prices would lure Canadians to choose flying instead of driving six hours or more to their destination. In addition, the thinking by prospective discounters is that on routes where there is head-to-head competition, budget-minded travellers would prefer to fly on an ULCC rather than Air Canada or WestJet Airlines Ltd.

The reality is that there are a wide range of issues to deal with, from lining up planes to securing financing.

Jetlines chief executive officer Jim Scott has Bombardier C Series jets on his mind for potential aircraft, even though Jetlines plans to launch with Boeing 737s and transition to the Boeing 737 MAX in 2021.

“We are still in a huge relationship with Boeing, but the C Series is a good airplane,” said Scott. “Bombardier has told us that it has no problem with us starting with Boeing and then migrating to the C Series. It will be who gives you the best deal.”

Jetlines has been working at becoming a ULCC since the fall of 2013, while Enerjet has considered entering the discount game for several years. Enerjet is using the temporary name FlyToo for its ULCC plans after initially using the label Jet Naked.

Jetlines hopes to have a solid financial foundation through a reverse takeover of Jet Metal Corp.

While Jetlines and Enerjet have been unable to get off the ground, NewLeaf Travel Co. Inc. launched as a reseller of flights on July 25.

NewLeaf can’t call itself an airline because the Canadian Transportation Agency (CTA) requires proper licences and other compliance with federal rules to be deemed an airline.

NewLeaf said it has managed to meet the CTA’s conditions for becoming a reseller. Critics such as air passenger rights advocate Gabor Lukacs, however, continue to have concerns. The Federal Court of Appeal ruled in June that it will hear Lukacs’s legal challenge to the CTA’s March decision. The CTA paved the way for NewLeaf to operate as a reseller of air services to 11 Canadian destinations without an airline licence.

For the fall and winter schedule, NewLeaf’s aim is to diversify into some sun destinations in the United States.

Dean Dacko, NewLeaf’s chief commercial officer, said the Winnipeg-based company is confident that it will be successful in its second launch attempt this year. Previously, NewLeaf announced in January that it had targeted a February takeoff for its services, but it had to postpone the start date, pending receiving the go-ahead from the CTA.

“Back in January, we created a lot of excitement and attention,” said Dacko in an interview.

Advertisement

He supports Jetlines’ efforts to persuade the federal government to increase the limit on foreign ownership of a Canadian airline to 49 per cent of voting rights from the current 25 per cent. “We’re on the side of competition and we’re on the side of loosening regulations to make that a reality,” he said.

Enerjet is also hoping that Ottawa will increase foreign ownership limits.

Jim Young left Jetlines in 2014 to focus on what could become NewLeaf. Young, who is now NewLeaf’s chief executive officer, formerly worked for six months as president of Jetlines and he is also a former marketing executive at Denver-based Frontier Airlines Inc.

NewLeaf has an arrangement with Flair Airlines Ltd. of Kelowna, B.C., to have Flair operate 156-seat Boeing 737-400s in the single-cabin configuration. Flair is providing pilots and other crew.

Plane scheduling has been worked out so that crew members return to their home base, said Young.

NewLeaf claimed in June that it had lined up Enerjet as Flair’s subcontractor for certain flights. But in July, Enerjet committed its leased 737-700 for flying in Europe on behalf of Transavia Airlines until mid-September, so Enerjet didn’t have any role in NewLeaf’s launch, said Enerjet president Tim Morgan, who is a WestJet co-founder.

Jump On Flyaways, a marketing company, signed a deal in July to help lure passenger traffic to NewLeaf by offering an online system in which consumers bid for seats that would otherwise fly empty.

Leave a Reply