Within the industry, we’ve been watching the signs for months - and now, market analysts are starting to say the same:
The pandemic is shaking up Canada’s airline industry, and giants like Air Canada and WestJet are facing serious new competition that could affect how Canadians travel.
A new media report this week quotes a note written by analysts at Canada’s National Bank to clients. While acknowledging the obvious disruption to the industry caused by COVID-19, it also points out that the pandemic has “created an opportunity for smaller airlines to aggressively expand and for new players to enter the market."
It points out that WestJet and Air Canada currently “control about 80 per cent of total domestic seat capacity.” That could change, however, with new and expanding competitors like Flair and Porter Airlines going for what the analysts call a “land grab.”
Where Air Canada and WestJet, as well as Transat and Sunwing have all “taken on more debt to survive the crisis,” they have also “significantly reduced their networks and trimmed capacity, which could provide an opening for other smaller airlines to fill the void."
The analysts noted factors like availability of aircraft, low lease rates, a pool of pilots and airports looking for new business and airlines to rebuild post-pandemic. So “even though travel demand remains depressed, conditions are arguably favourable for new competitors to make their mark."
Both Flair and Porter Airlines are already making their moves.
“The right time”
As Open Jaw reported in JUL, Porter Airlines announced it was extending its North American service with the introduction of 80 fuel-efficient Embraer E195-E2 aircraft - with transcontinental range - into its fleet beginning in 2022. That leads to the possibility of a continental route network for the airline. In addition to flights out of Toronto’s Island Airport, Ottawa, Halifax and Montreal, Porter will also fly for the first time out of YYZ.
At the time of the fleet expansion announcement this summer, while the country was still in the full throes of the pandemic, Michael Deluce, president and CEO of Porter Airlines, said, “We believe that now is the right time to make this investment as the pandemic resets the aviation landscape. Adding a diverse selection of popular business and leisure destinations to our network means that we are better positioned to serve the needs of many more passengers.”
Deluce added, “We are bringing Porter’s distinct style of service to dozens of new North American cities.” That includes Vancouver, Seattle, and San Francisco as well as U.S. sun destinations, Mexico, and the Caribbean destinations like Los Angeles, Las Vegas, Orlando, Miami, and Nassau.
The National Bank analysts believe Flair Airlines is “already having an impact on pricing on routes where it competes directly with Air Canada and WestJet.”
The Edmonton-based Ultra Low-Cost Carrier (ULCC) keeps its no-frills, base price low, but charges for extras like carry-on baggage and seat selection. "Even when considering Flair's unbundled fare structure, its all-in fare generally comes in lower than the other two airlines," the analysts said.
Flair Airlines too has increased its fleet and added new routes that include key sun destinations.
No Guarantees
But the success of upstart competitors is by no means assured, the analysts said.
"As evidenced by the long list of failed airlines in Canada over the past 20 years, history would suggest that new airlines face long odds of success,” they cautioned.
"Developing new routes can take many months to turn profitable and attempting to take market share from larger incumbent airlines can be costly,” requiring competitors to have deep pockets over the long haul to make serious inroads against the market share of Canada’s established airlines.
