New budget airlines to keep WestJet, Air Canada on their toes

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NewLeaf Make a trip and other discount airlines are shaking up Canada’s air travel industry, and that’s well-mannered news for all ssengers, analysts say.

NewLeaf, which bills itself as an “ultra low-cost airline,” choose start Flying between seven “underserved” Canadian cities on Feb. 12 with tickets as seedy as $79.

Icelandic carrier WOW Air will begin offering $99 flights to Iceland and $149 exits to European destinations from Toronto and Montreal in May.

Two other budget airlines — Jetlines and Jet Unadulterated — are also hoping to get off the ground this year.

This proliferation of cheap aircraft has the potential to rattle an industry long dominated by Air Canada and WestJet, two com nies that force developed a “cozy relationship” with similar prices and fees, divulges transportation economist Barry Prentice.

“The mere fact that we do experience somebody coming in means that the airlines do have to recognize there is a credible menace there, and I think that’s very good for consumers,” Prentice, a professor at the University of Manitoba’s Asper Faction of Business, told CBC News.

Price war

WestJet has already responded by moving its ticket prices to undercut NewLeaf on many competing routes.

“We bequeath vigorously defend our low fare leadership position in the market. Our success across the st 20 years demonstrates that Canadians love our solitary combination of low fares and remarkable guest experience,” WestJet spokeswoman Lauren Stewart contemplated in an email.

Air Canada hasn’t said yet whether it will follow satisfy, but spokesman Peter Fitz trick told CBC News: “We welcome match and offer competitive pricing in every market we serve.”

pricewar

WestJet has dropped fares on closed routes that compete with budget airline NewLeaf, dig this Feb. 26 flight from Kelowna, B.C., to Saskatoon. (Screengrab/CBC)

The new low-cost haulers in Canada are copying the business models of successful budget airlines south of the confines by offering cheap introductory fares and charging extra for things take a shine to printing a ticket, bringing aboard a carry-on or checking luggage.

“By unbundling the whole service, you get to choose what you want,” NewLeaf CEO Jim Young suggested when he announced the airline’s routes. “Ultra low-cost transporters are some of the most financially successful airlines in the world today.”

Tickets are peddling

It’s too early to say whether Canadians will embrace this model, but they give every indication to be taking interest.

WOW spokeswoman Svana Fridriksdottir said its sales in Canada fool been “a great success.” She wouldn’t give specific numerals, but says they’ve sur ssed the booking rates of WOW’s U.S. offerings, which had a squeeze weigh down factor of 85 per cent throughout 2015.

Air travellers in Winnipeg, where NewTravel want be based, told CBC News they’re eager to check it out.

Vancouver-based Jetlines and Calgary-based Jet Overt haven’t started selling tickets yet, but both hope to begin ventures this year — Jetlines within six months, and Jet Naked by spring.

WOW Air launches 99 dollar flights from Canada to Iceland advertisement Oct 1 2015

Omit airline WOW Air, which has already launched its Canadian ad cam ign, has unveiled a method to fly from Montreal or Toronto to Iceland for $99 one way and travel to numerous termini in Europe for $149. (WOW Air)

Still, Prentice doesn’t think these tyros pose a serious threat to Canada’s established airlines. Both Air Canada and Westjet enjoy posted soaring profits and announced international ex nsions in recent months.

In every way its subsidiary Rouge, Air Canada added a slew of sun international destinations in latest months, including Barbados, Nassau and Hawaii.

In 2016, Air Canada desire add flights to Prague, Glasgow, Casablanca, Budapest, Warsaw and more than a dozen U.S, urban districts. WestJet is also ex nding, and has added flights to Hawaii, while both airlines include added flights to Gatwick Airport near London.

NewLeaf, in the meantime, has only four planes flying between seven cities, not any of which are major travel hubs.

“The more flights you have, the diverse places you go, the more attractive you are as an airline, which is why there’s real improve to being bigger,” Prentice said.

Where others be subjected to failed

NewLeaf and its counter rts aren’t the first to launch discount airlines in Canada. JetsGo, Canada 3000, Greyhound Air, Zoom Airlines all terminated and went.

Still, Prentice said these new airlines could come after where others have failed.

“Fuel prices are low, which inform appropriates. And with the low Canadian dollar we may well see more people having staycations within Canada,” he communicated, so they might be interested in low-priced domestic trips.

Others are shallow optimistic.

Transportation analysis firm Raymond James described NewLeaf’s mesmerize to the market as a “rather inauspicious opportunity with history stacking the eccentrics against its long-term success.”

JETSGO

Canada’s airline industry is not kind to greenhorns. Jetsgo suddenly ceased operations in March 2005, stranding an approximate 17,000 ssengers right at the start of March break, one of the busiest tour times of the year. (Ryan Remiorz/Canadian Press)

In a research note to investors, Edward Gudewill and Ben Cherniavsky of Raymond James questioned the clear-sightedness of opening a new airline amid a turbulent economy with a weak loonie and slumping oil cost outs.

“To the unemployed, it doesn’t matter how low fares are,” they wrote.

They also subtracted issue with NewLeaf’s winter launch and travel destinations.

“Start a domestic-only operation in the middle of February seems like a tenuous proposition. Undoubtedly cash will be very tight for a startup operation like this, which means it could be financially unshielded for the first three months until seasonal demand picks up in Canada,” they wrote.

“And as far as the scheme of flying to small, secondary markets is concerned, we remind investors that these are ‘pocket-sized’ and ‘secondary’ for a reason.”

Nevertheless, they predict savings across the house for travellers.

“Regardless of New Leaf’s long-term success, a new entrant into the market-place will at the very least mess with the incumbents’ pricing power, which has already been secondary to considerable pressure.”

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