Where Canada’s new budget carriers will likely take you (and not take you)

Two-thousand and eighteen will presumably be the Year of the Ultra-Low-Cost Carrier in Canada. Already one such operation — the little-known Flair Airlines, which acquired the assets of “virtual airline” NewLeaf Travel this year — is in the air serving domestic routes, but has yet to make a substantial impact on the market. Three others, meanwhile, are planning to make an entrance.

  • Swoop, WestJet’s ultra-low-cost subsidiary, which is expected to begin selling seats in February in preparation for a June 1 launch. Destinations have yet to be announced, but Swoop will use 189-seat Boeing 737-800s — 21 more than are currently installed on WestJet’s 168-seat 737-800s.
  • Canada Jetlines, which is also planning on a June 1 launch. They plan to start with only domestic flights, from Hamilton, Ont. to Halifax, Winnipeg, Edmonton, Calgary and Abbotsford, B.C. Flights from Hamilton to holiday destinations in the U.S., Mexico and the Dominican Republic would follow in the winter of 2018-19. Like Swoop, Jetlines also plans to operate 189-seat Boeing 737-800 aircraft.
  • FlyToo, a proposed spin-off of charter carrier EnerJet, is considering getting into the market. As of late-November, however, no final decisions had been made yet on whether the airline would operate Boeing 737s or Airbus A320s, focus on domestic or international routes, or even stick with the “FlyToo” name or give the airline a different brand.

These airlines propose to offer Canadian travellers low base fares. Jetlines has said that it will offer fares comparable to the price of a pair of jeans, while Swoop has suggested that base fares will be about one-half of WestJet’s typical fares.

These carriers propose to emulate Ryanair and EasyJet in Europe, which offer very low base fares but charge extra not just for baggage and beverages, but even for having your boarding pass printed at the airport (€15, or $23 Cdn., on Ryanair) or to use their telephone call centre (£0.13, or $0.22 Cdn., per minute to call Ryanair’s U.K. call centre to make bookings; service not available during the evening or overnight hours.)

But if you think the extra charges are a small price to pay in exchange for being able to go visit Aunt Suzy in Ottawa for $250 round-trip or being able to hop over to Calgary for the same price to see a football game — not so fast.

There is a logic to how ultra-low-cost carriers make their money. It’s by going to the places where passenger loads increase rapidly as fares go down — and not going to the places where that correlation does not exist. (Or, if they do, they risk losing money and going out of business.)

For example, what if I offer you a non-stop flight from Winnipeg to Honolulu in February for $750 round-trip? You might think about it.

What if I offer you that trip for $500? Your interest has likely gone up a bit.

Now how about $400? Your interest has likely gone up still more.

Now forget all about Honolulu. What if I offer you a February round-trip to Thunder Bay for just $400?

“Ugh, no thanks,” you’d likely say.

Fine; I’ll lower the price to $200 round-trip, plus you can go in nice, warm July instead of frigid February.

“Thanks, but no thanks.”

$100 round-trip? Your golden opportunity to spend a week in Thunder Bay!

“Forget it. What the hell am I going to do in Thunder Bay?”

The first map below shows a number of destinations in Europe and the Mediterranean served by Ryanair and/or EasyJet — except for the fictitious Zurich hub in the middle. If you ran a traditional hub-and-spoke system, you could connect all of these cities to each other through the hub. Since this requires a lot of passenger processing and daily (or near-daily) service to all destinations to work effectively, it’s a very expensive way of doing business — and the fares reflect that.

The traditional hub-and-spoke model: It offers frequent and convenient transportation between many cities, including those with too little traffic to ever support a non-stop flight, such as Belfast-to-Vilnius. But it’s a costly service to provide, so fares tend to be higher. (Map generated on gcmap.com)

So, the ultra-low-cost carriers fly point-to-point. They pick up a load of passengers in one city, drop them off in another, and then the jetliner flies away to someplace else. Only the most popular routes get daily service year-round. Many routes are only served two or three times per week on a seasonal basis; some routes even only get one flight per week.

Note the pattern in this map, which represents a random selection of routes on which Ryanair and/or EasyJet will be offering at least one non-stop per week in January 2018. Note that these carriers largely exist, with only the occasional exception, to bridge two divides:

– The divide between “cold and cloudy” northern Europe and the “hot and sunny” destinations;

– The divide between “richer Europe” and “poorer Europe”, following the prevailing migration patterns.

Note also that almost all of these routes are north/south. Very few are truly east/west.

A random selection of city-pairs that will have nonstop Ryanair and/or EasyJet service in January. Note how these are mostly north/south holiday routes; though some follow migration paths between richer and poorer areas of Europe. Cheaper for passengers — especially for tourists and people who’ve moved abroad in search of work — but only a few routes are offered on both a daily and year-round basis.

Now, consider the following random city-pairs that the ultra-low cost carriers will not be serving at all. Note that ultra-low-cost carriers largely do not exist to connect business capitals or cities with similar climates and similar levels of economic development.

A “non-service” map: Random city-pairs where neither Ryanair nor EasyJet can take you (at least on a cheap, non-stop basis) in January, despite serving these cities. Note that service between places with similar climates and similar levels of economic development — and thus more limited migration — is not the purpose of ultra-low-cost carriers.

In short, outside of a few exceptions, you need either a disparity in wealth or a disparity in climate to make an ultra-low-cost model work.

So, what should we expect from a successful ultra-low-cost carrier in Canada?

First — at least during the winter months — it will need to exist primarily to carry Canadians non-stop to warmer climates. If I were to place a bet, it would be on Swoop replacing WestJet entirely on some of its U.S. routes and most, if not all, of its Mexican, Bermudan, Cuban and other Caribbean routes. The other upstarts should consider doing the same: climate differences and the popular tourism paths are where the money is in the ultra-low-cost carrier business.

Second, to the extent that ultra-low-cost carriers do offer east-west routes, expect this to follow existing tourism and migration flows, at days and times that suit the holiday traveler. Do not expect daily or year-round service — this is what Air Canada and WestJet exist to do, and not what ultra-low-cost carriers make their money on.

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