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.