42 total articles
As weakness undermined the oil sector in Canada’s western provinces, two aspiring ULCCs in the country – Jetlines and Enerjet – slowed their development plans in the face of a new economic reality. Their rival NewLeaf Travel adopted an entirely different path, using idle aircraft capacity freed up as a result of the depressed oil and gas business.
All three entities have engaged in some form of litigation during various phases of their respective development, and NewLeaf finally debuted in Jul-2016 after enduring some regulatory confusion that had thwarted its initial launch in Feb-2016. With roughly two months in business NewLeaf is making some schedule adjustments, but pledges that overall expansion is on the horizon.
Jetlines and Enerjet have sought exemptions from Canada’s foreign ownership rules in order to attract international equity partners, but the government appears to be dragging its heels on a decision, which further clouds the ability of those two companies to bring their ULCC visions to reality.
NewLeaf: the Canadian ULCC readies for launch as a "virtual" airline, and WestJet is ready to pounce
Canadian ULCC NewLeaf Travel plans to make its debut in Jul-2016 after clearing up some uncertainty over correct licensing requirements. NewLeaf is a travel reseller, with its partner Flair Airlines operating aircraft on the new routes. NewLeaf’s different approach has unsurprisingly drawn scrutiny, with questions arising over the viability of a “virtual” airline.
NewLeaf stresses that its strategy is more capital-efficient, and delivers better returns to shareholders by bringing the ULCC concept to market more quickly than other entities attempting to establish a ULCC presence in Canada. Jetlines, which is attempting to launch as a clean-sheet entity, is seeking an exemption from Canada’s restrictive rules governing foreign ownership of airlines – in order to attract non-Canadian investors with experience in establishing ultra-low cost airlines.
During the past three years the Canadian ULCC start-ups attempting to establish themselves have been lumped with failed carriers including Jetsgo, Zoom and Skyservice. Obviously it is too soon to tell if NewLeaf and Jetlines will succumb to the same fate, but there is no question that there are opportunities to stimulate traffic in Canada. However, Canada’s second largest airline WestJet is already making moves into NewLeaf’s markets, and will use its significant market power to compete fiercely against the start-up ULCC.
The beginning of 2016 held much promise for aspiring ULCCs in Canada as NewLeaf Travel unveiled its routes for a Feb-2016 debut. But the company postponed its launch while Canadian regulators review certain licensing procedures. The ULCC movement in Canada began with much fanfare in late 2013, but then quietened down until a third new entrant – Enerjet– outlined its plans to adopt the model in Canada, in mid-2015.
After NewLeaf delayed its debut, the first company to emerge as a ULCC contender in Canada, Jetlines, firmed a deal to engage in a second reverse takeover with a company listed on the Toronto Stock Exchange. The proposed transaction is designed to raise the necessary funds for launch. Jetlines’ first attempt at a similar transaction resulted in litigation that was later settled out of court.
All the fits and starts among the pool of upstart Canadian ULCCs are creating some scepticism about their tenure in the country’s duopolistic airline industry, and they will need customer confidence. In parallel, the current Canadian economic environment may not prove to be the most fertile ground for new entrant airlines.
The unveiling of routes set for debut in Feb-2016 by Canada’s NewLeaf Travel generated significant buzz about a long awaited ULCC revolution in Canada. But the reality is New Leaf’s approach is more evolutionary, and any market disruption it may trigger will take some time to reach fruition.
NewLeaf represents a small fraction of Canada’s domestic capacity in 2016. Air Canada and WestJet will no doubt watch how the market responds to NewLeaf’s no-frills model closely, but their competitive response will be measured. The upstart has taken great pains to avoid direct competition with the Canadian titans, opting to base itself from secondary airports with low frequency service.
NewLeaf’s success hinges on many factors, but one crucial part of its execution is educating passengers about its business model. The largest North American ULCC, Spirit Airlines, was late in launching a campaign to ensure that passengers understood its offering, and it still generates the highest level of customer distaste among major US airlines.
During the past year the pool of upstart ULCCs in Canada has grown to three contenders vying to adopt the business models practiced by Allegiant and Spirit to the Canadian market place. Accompanying the growing number of new entrants are executive shake-ups and lawsuits that are adding some intrigue to the line-up of airlines hoping to create a new era of passenger stimulation in the country.
One theme that seems to be emerging among Jetlines, NewLeaf and Enerjet (Jet Naked) is a push from Toronto Hamilton Airport, which seems like fertile ground for the ULCC concept. The addition of one or more airlines would be a huge win for the airport as it works to reach its target of serving one million passengers annually.
It is unlikely that all three airlines will ultimately commence operations, or that the Canadian market can sustain three ULCCs. But each company remains bullish about pent up demand, and their respective strategies for tapping customers they believe cannot afford air travel.
In Homer's epic tale The Odyssey, it takes Odysseus 10 years to return home after the Trojan War. Although CEO Adam Scott's first attempt to start Odyssey Airlines began around nine years ago, he will he hoping for a smoother journey after the planned launch of all-business class flights between London City Airport and New York in 2016.
Odyssey's business model is based mainly on the convenience of London City and the deployment of the Bombardier CS100 in a 40 seat configuration. It will compete with British Airways' 32 seat A318 business class-only service from the same airport, in addition to multi-class services from BA, American, Virgin Atlantic, United and Delta from Heathrow.
History has not been kind to premium-only operators on the North Atlantic, whose share of global premium revenues is declining. In spite of this less than encouraging backdrop, Odyssey is not the only airline planning all-business class operations between Europe and North America. Following our recent analysis of Dreamjet's forthcoming launch between Paris and New York, in this second of two reports we look at Odyssey's prospects.