W_2015_03_04

WWW.WINGSMAGAZINE.COM March/April 2015 | WINGS 9

PLUNGING OIL PRICES,

CANADA JETLINES

GROWTH

Cheap oil could be the ticket for Canada

Jetlines, a proposed Canadian ultra-low

cost carrier (ULCC) to gain traction in the

tough Canadian market. No commitment

to a launch date has been made. The car-

rier had expected to begin operations this

summer using two older Boeing 737 air-

craft. That timetable may be pushed back

a few weeks at least, following the break-

down of an amalgamation agreement

between Canada Jetlines and Inovent

Capital, a capital pooling company.

Canada has been an elephant’s grave-

yard for low cost ventures, and neither Air

Canada nor WestJet would be expected to

give a newcomer a soft ride. Air Canada

has announced plans to introduce Rouge,

its low cost subsidy on domestic routes this

year between Nova Scotia, Toronto and

Calgary, and Toronto and Kelowna, B.C.

Jetlines plans to create hubs in Vancou-

ver, Winnipeg and Hamilton over the next

three years. It will sidestep direct competi-

tion with Air Canada and WestJet (avoid-

ing Calgary and Toronto altogether), but is

apparently ready to go head-to-head with

the mainline carriers regional operators,

Air Canada Express and Encore, promoting

the advantages of jets over turboprops and

fares about 30 to 40 per cent lower than

current tariffs. Jetlines will follow the low-

fare, high-yield business model of ULCC’s

in Europe and the United States where a

higher percentage of revenue comes from

ancillary sales such as checked baggage and

inflight cabin sales. Spirit Airlines, a Florida-

based ULCC reports that 38 per cent of

revenue comes from ancillary sales.

Jetlines had hoped to raise $50 million

through its partnership with Inovent. The

company is reported to be in talks with

another investor and that launch and

growth plans remain in place including

the eventual launch of an Initial Public

Offering. For its part, Inovent says Jetlines

has no right to terminate under the agree-

ment, suggesting a messy divorce before

its wheels up later this year.

Jetlines expects to operate eight 737

Classics in 2016, growing to a mix of older

and new 737s by mid-2018, as it makes its

push into central Canada, the U.S. and the

crowded sun destination market.

Canada is the only developed economy

without a ULCC. Many industry observers

believe there is room for at least one such

carrier to operate below Air Canada and

WestJet fares on Canada’s 20 busiest city

pairs, and in many secondary markets,

although both mainline carriers have been

retooling their operations to compete ag-

gressively at the lowest end of the market.

Still, the lower fuel environment is

seen as a benefit to new entrants like

Canada Jetlines using older aircraft that

are cheaper to capitalize (see, "The finer

points of fuelonomics," page 14).

“Although older aircraft would burn

more fuel and need more maintenance, it

would be offset by lower acquisition costs

and cheap fuel,” said Brian Foley, a New

Jersey-based Aviation analyst.

Clearly Jetlines is thinking long haul. In

December the company signed a defini-

tive purchase agreement with Boeing to

acquire up to 21 737 MAX aircraft for de-

livery starting in 2021. The deal includes a

firm order for five aircraft with options for

an additional 16 airplanes, with conver-

sion rights to the 737-8 MAX.

PHOTO: CANADA JETLINES (TOP); VANCOUVER INTERNATIONAL AIRPORT (BOTTOM)

Plunging oil prices could give ULCC airline Canada Jetlines a fighting chance in the Canadian market.

Vancouver International Airport has

opened a new $213 million expansion of

its Domestic Terminal. The expansion and

upgrades are the first major infrastructure

project completed as part of the airport’s

10-year gateway strategy announced in

2012.

“YVR is facing increased competition

from other airports, and both travellers

and airlines have choices,” said Craig

Richmond, chief executive of the Van-

couver Airport Authority. “In order to

remain competitive and continue to be an

economic generator and jobs creator for

British Columbia, we must continue to

invest in projects that make it easier and

faster for passengers and their baggage to

move through the airport.”

The A-B Connector features new retail,

artwork celebrating the B.C. Interior and

gate capacity, and will be used primar-

ily by WestJet, Central Mountain Air,

Air North, Hawkair, Sunwing and Air

Transat.

YVR is Canada’s second busiest airport

and was voted Best Airport in North

America in 2014 for the fifth consecutive

year by Skytrax World Airport Awards.

The facility is also the only North Ameri-

can airport to rank in the top ten for

airports around the world.

YVR’s $1.8 billion gateway strategy to

attract new airlines and routes, and im-

prove the customer experience, includes:

• More than 700 metres of secure cor-
  ridors and moving walkways to re-
  duce connection time for passengers.


• New high-speed baggage systems.
  (A faster baggage system to move
  luggage between international and

domestic flights should open in

spring 2016.)

• Runway safety enhancements.
  Japan’s All Nippon Airways launched
  its first Canadian service to Vancouver
  with a daily Boeing 767. Australia’s Qan-
  tas recently announced increased seasonal
  service to Vancouver following a six flight
  trial in January.

Vancouver International Airport has expanded its

Domestic Terminal to better serve passengers.

AIRPORTS

YVR EXPANDS NEW DOMESTIC TERMINAL