Another discount airline takes off — but they may not all survive

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Hriday Balachandran enjoyed his recent trip to Vancouver so much on discount airline Lynx Air that he just booked tickets to Kelowna, B.C., for the Thanksgiving weekend.

It was the Calgarian’s first time flying with the airline and the ticket price was the main selling point — about $100 round trip.

Balachandran has also flown with Swoop and had a similar experience.

“They have promotions going on all the time,” said Balachandran, who used to work at Air Canada and WestJet in their IT flight operations departments. 

“Where else will you get that kind of price?” 

The launch of Canada Jetlines this week brings the number of discount carriers in the country to four, along with Lynx, Swoop and Flair. While the airlines focused on offering cheap fares are growing, so far there hasn’t been a noticeable impact on overall ticket prices and there are questions about whether the air travel industry is large enough to support so many carriers.

For now, Jetlines has a single aircraft operating on just one route between Calgary and Toronto, while Lynx has six aircraft flying to ten cities. Flair and Swoop are much larger.

The number of aircraft is on the mind of Jason Hampton, who flew with Lynx to Newfoundland to visit family. As hurricane Fiona approaches, he’s been nervous all week about whether the airline will be able to get him back to Calgary this weekend.

“My anxieties of course are the possibilities of delays or cancellations of my flight. I’m hopeful they can get me out and home,” he said. “I don’t know what to expect.”

Otherwise, he was impressed with Lynx. Like other discount carriers, there are reduced amenities and any extras come at a cost. There was no in-flight entertainment or food service, besides water, but he was prepared so he said it wasn’t a big deal.

The airline industry was one of the sectors hardest hit by the pandemic in 2020, causing many carriers to delay or cancel orders for new planes. As air travel began to recover, there was a rare opportunity for new airlines to launch and have access to modern aircraft at reduced prices. They could also find space at in-demand airports.

While there is more competition in the sky, ticket prices are largely the same as they were before the pandemic began.

The average ticket price of a flight in Canada was $193 one-way before taxes and fees in July, when the most recent data is available, according to aviation analytics firm Cirium. That’s a $3 increase compared to July 2019.

Flair and Lynx both offer a Calgary to Toronto flight, along with other carriers such as Air Canada and WestJet. The average ticket price was $236 in July, compared to $237 during the same month in 2019.

On the Calgary to Vancouver route, however, the average ticket price was $31 cheaper.

Ticket prices in July might not be the best measurement, said John Gradek, head of McGill University’s aviation management program, because even the discount airlines will raise their fares during the busy summer travel season.

Considering the number of airlines now operating in the country, some experts say there aren’t enough passengers to keep them all afloat. Canada already has a long history of bankruptcies and failures in the aviation industry.

“We’re going to have some consolidation. It’ll be foolish for us to think that the industry can survive with six carriers operating on routes like Toronto-Calgary or Toronto-Vancouver. That is way too much capacity,” said Gradek.

The airline industry is already in a state of flux. A proposed merger between Air Canada and Air Transat was called off in 2021, while a deal between WestJet and Sunwing is ongoing. This summer, Flair was facing the prospect of losing its licence because of rules related to foreign ownership of Canadian airlines, but ultimately was allowed to keep flying.

The discount carriers that find success “are the ones who can keep their operations simple. Simple translates to lower cost operations and fewer things that can go wrong. Lower cost with less problems means lower fares — in most cases,” said Jim Hetzel, director at Cirium, in an e-mail.

The low-cost airlines in Canada are all private, so their financial performance is unknown.

The discount carriers face a stiff financial challenge to offer low ticket prices during a time when fuel, labour and airport costs are all high, former WestJet chief executive Gregg Saretsky said in an interview.

“I don’t think there is a chance they are making money,” he said. “I could do some back of the envelope math which would suggest that they’re all burning cash. So, survival will only come if the investors continue to pour more cash into the operation.”

“They’re all chasing a dream, but it’s not going to end well.”



www.cbc.ca 2022-09-24 08:00:00

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