The Next North American Battleground… Small Canadian Cities

North America is a big place. When you think about where the next big airline battle is likely to be, you probably aren’t going to guess it’s in small town Canada. You’d be wrong. The battle is brewing, and Air Canada is on the defensive. WestJet is getting ready to invade.

WestJet and Air Canada Face Off

In Canada, there are two big domestic players. We have the big ole’ legacy Air Canada and the young punk WestJet. (Yes, there are other players including the stylish and cool Porter and some of the guys doing rugged flying into the north, but those are niche players.) WestJet has often been called the Southwest of Canada, but it’s really more like JetBlue. There is live television onboard, and the airline wants to partner with many others in order to feed its flights. It also has put together an extra legroom product that it will sell for a fee.

Dynamics of Canada
One of the more interesting announcements to come from the WestJetters was the decision earlier this year to create a regional airline that would fly turboprops around smaller cities.

This sounds pretty goofy, but Canada is a different kind of place, eh? It is an enormous country from a geographic perspective but all but 2 or 3 people out of its 35 million residents (an eighth of the US population) live very close to the US border. So the country’s air travel needs tend to be very unique.

WestJet Choose Small Over Big
There aren’t a ton of cities that can support big airplane service, but WestJet has done a great job of making huge gains in those places. But the opportunity is somewhat limited, and that means WestJet had to start thinking about going elsewhere if it wanted to expand. It could have been like most airlines and tried to go bigger. After all, flying big airplanes over oceans is downright sexy, right? But that would have been pretty stupid.

Air Canada today already flies all over the world and fills many of those seats with cheap connectors from the US. There is limited service from non-Canadian carriers (thanks to some protectionist policies up north) but ultimately, there isn’t a lot of opportunity. At least, there isn’t nearly the opportunity that there could be in the opposite direction.

Feeding small cities in the global network is still largely the domain of Air Canada and its regional fleet. Sure, there are plenty of other operators who do a lot of the tiny town flying – places like mines and oil fields. But for getting people around Canada and into the rest of the world, Air Canada dominates. WestJet saw that and decided that there was opportunity. After all, two beavers are better than one, right?

An Encore
So WestJet has been rolling right along. It decided to buy a fleet of Q400 turboprops. (Buy Canadian!) And it decided to name the airline… WestJet Encore. At first that named seemed odd, but then I remembered the dual French/English thing up there. WestJet Encore works in both languages. Though I think that I speak for English-speakers everywhere in saying that we would have all been perfectly fine with WestJet Part Deux instead.

But let’s get back to the point. WestJet Encore is pretty much ready to go except for a few tiny things… like where it’s going to fly. Routes won’t be announced until early 2013, and it won’t start flying until later next year. So there is plenty of time, but Air Canada isn’t taking any chances.

Air Canada Flexes Its Muscles
Air Canada has already seen a lot of traffic disappear domestically thanks to WestJet’s growth, and it doesn’t want to lose anything on the smaller routes it still dominates. So even though we don’t know where WestJet Encore will go, Air Canada is ramping up.

Apparently Air Canada thinks that a big chunk of the ramp-up will be in the West and so it’s diving in head first. Starting December 1, there will be one more flight each day between Calgary and Fort McMurray, Grand Prairie, and Yellowknife. Edmonton to Ft McMurray, Regina, and Saskatoon will see an extra flight as well. And not to be left out, Vancouver will get an extra flight each day to both Ft St John and Nanaimo. As of today, most of these are flown with 50 seat CRJs. Beginning in February, however, the 74 seat Q400 will begin moving into these and other routes in the region. So we’re seeing more flights and more seats on each flight. Let the bloodbath begin!

By the time WestJet moves into these markets, it looks like Air Canada will be ready for a fight. I’d imagine we’re going to see some serious bleeding until things sort out.

In the end, I can’t imagine that these markets can support all the service they’re about to get, so there will have to be changes down the line. Will WestJet really be able to make money in an area where other low cost carriers have struggled? If this were in the US, I’d say no. But it’s Canada. And things work differently up there. At least, that’s what WestJet is banking on.

[Photo via Wikimedia Commons User Leech44/CC-SA 3.0]


21 Responses to The Next North American Battleground… Small Canadian Cities

  1. I am very interested to see how this plays out. Fort Mac, Grand Prairie and Fort St. John are booming oil & gas towns that are very isolated. With most offices in Calgary, Edmonton and Vancouver, these routes are going to be high frequency demanding routes, which makes them good fits on Q400s. While living in the west for a while, I was surprised how much travel happens between Winnipeg-Regina, Winnipeg-Saskatoon, Winnipeg-Edmonton, Regina/Saskatoon – Edmonton. There is pretty limited routing on these right now, and it is not usual that your flight from YWG-YYC has 33% of the passengers connecting to Saskatchewan. Again, this seems like a good fit for the Q400. I am not sure how this plays out in the East. Porter has picked a lot of the low hanging fruit, and the left overs – North Bay, Sarnia, Sherbrooke, Chicoutimi, Rouyn-Noranda, Val d’Or have limited appeal.

  2. Exiled Antipodean says:

    The Q400 is a far nicer aircraft for passengers than a lot of the small regional jets, and the economics of the thing better again.

    • Todd says:

      Nicer how? They’re louder, slower, and no bigger than any RJ with 4-across seating. Now that Horizon is all Q-400, I try to avoid them, especially on PDX to Bay Area flights, which take 2 hours on a Q-400, instead of 1.5 hours on a jet. Also, Horizon Q-400s lack sinks in the lavs, have non-reclining seats, and no window shades (though perhaps Westjet could install some of these options).

  3. Maybe WestJet will surprise everyone and those turbo markets will be to/from south of the border towns or eastern Canada.

    • Sanjeev M says:

      I would not be surprised to see some US feed.

      The bigger question is does WS have enough codeshare and interline feed to support this regional flying? I know they have some codeshares including DL and Cathay but how far along is this?

    • Russell B. says:

      David I’m from NH but living in Calgary. I emailed WestJet to ask about YYZ-MHT for Encore as AC cancelled that route and I my only choice is BOS (nightmare) when I go home to visit. Their reply was very quick and polite, but they did say they’re only considering domestic routes for the foreseeable future.

  4. Jon says:

    They’re twice the fun! Ask anyone!

  5. Chicago Chris says:

    Forgive my ignorance on the Canadian industry, but is there a market for an Allegiant-type carrier to fly these far away Canadians to warm (U.S.) leisure destinations?

    Obviously taxes would be higher, but there are already many who drive to boarder towns to fly discount carriers. I have to think those who are too far to make the drive would want to get somewhere warm.

    • CF says:

      Chicago Chris – There is definitely a market for this, though so much of the population has easy access to US border airports that are way cheaper so it’s a bit tougher. There is a huge market to the Caribbean, however.

      There are plenty of leisure carriers/tour operators who do this kind of thing. Sunwing is one. Thomas Cook runs a good-sized operation there as well.

      • Bravenav says:

        Air Transat is a big player in this area, flying less than daily to a bunch of Caribbean destinations in the Winter, and then to Europe in the Summer. Westjet does a lot of this as well, flying to sunny warm destinations from over 20 airports across Canada, including ones as small as Moncton, Thunder Bay, and Comox. On the weekend, Cancun is almost a mini-hub for Westjet to Canada and Delta to the US.

  6. gary says:

    The Canadian airlines also need to address their government mandated costs and how this affects airfares especially for transborder flights. They need to put pressure on the government and airports to lower fees and taxes to spur more air travel. If you look at Air Canada MKE to YYZ the lowest fare with sat night stay is 700 dollars for a 1 hour flight. 200 dollars of it is US and Canadian taxes/fees. There is a reason Canadians drive over the US border to fly to florida and beyond.

    • Scott says:

      I’ll bite… on YYZ-MKE-YYZ; the fare is $772 + the following (priced on AC).

      ACTUALLY PART OF THE TICKET PRICE
      Surcharges 15.00 (which are just a way to make the ticket price seem lower)

      US TAXES
      U.S.A Transportation Tax 33.86
      U.S Agriculture Fee 5.07
      U.S Passenger Facility Charge 3.04
      U.S.A Immigration User Fee 7.09
      September 11 Security Fee 2.53
      U.S. Federal Customs Fee 5.57
      $57.76

      CANADIAN TAXES
      Canada Airport Improvement Fee 25.00
      Canada Goods and Services Tax (GST/HST #10009-2287 RT0001) 39.96
      Canada Harmonized Sales Tax (GST/HST #10009-2287 RT0001) 3.25
      Air Travellers Security Charge (ATSC) 12.10
      $80.31 (of which all but $40.35 would be recoverable to a business)

      Now, for a business buying a ticket, the GST/HST are deductible from any GST/HST you collect, so it’s a non-issue, so we’re talking $57.76 in US taxes and $40.35 in Canadian.

      YYZ-MKE is a bad example, because it’s a monopoly route, but the big issues versus driving to BUF are:
      1) A US domestic ticket has a built in 7.5% tax to pay for airport/ATC infrastructure, whereas in Canada that’s funded through larger AIF(PFC) fees, and the airline having to pay for the ATC. On an international ticket, it appears as a USA Transport tax. Note for YYZ-MKE that the Canadian AIF is less than the US Transport Tax + PFC
      2) A US domestic ticket has a massive example, because the US have large charges for entering the ticket by air. $5.07 + 7.09 + 5.57 in the example above, whereas it’s free to drive across the border.

      You really need to compare apples to apples.

    • Sean S. says:

      True, but there is also the irony of Air Canada being more affordable when you live in the northern reaches for getting out of the US to other countries. Air Canada is often the best deal when flying out of MKE, for instance, for many international destinations.

  7. Bill Hough says:

    Westjet, to their credit, still allows one free checked bag up to 50 pounds. I hope they continue this policy as they expand into smaller markets.

  8. I’ve been really pleased with the service and routes offered by Westjet. When Air Canada dominated, years ago, there wasn’t as good of routes and service to and from smaller and remote cities.

  9. S. Brown says:

    I’m surprised to see just one mention of Porter in this article. These moves by WestJet and Air Canada are ALL ABOUT Porter: Squeezing it in the east and keeping it out of the west.

    Since Porter has come around, fares have gone down and capacity (from AC and WS) has gone up in Central Canada and parts of Eastern Canada where Porter competes. It has a particular impact on the very important Toronto-Ottawa-Montreal triangle.

    Every time in the past 30 years that an airline has taken on “the big 2″ in the Eastern and Western (Vancouver-Calgary-Edmonton) triangles it has been met with a competitive response that has driven the weakest carrier out of business. Think Wardair in the 1980s, Canadian Airlines in the late 1990s, and Jetsgo in the early 2000s

  10. A says:

    One thing that you missed about Canada is that their land based transportation system is abysmal at best in remote areas. If you’re in Toronto and driving to Vancouver what the fastest way? To drop down to the US Interstate Highway system of course. Every Canadian knows this. But getting to remote areas you can’t do that.

    For example, going from Winnipeg to Brandon is just over 215km (roughly 130 miles), but almost a 3 hour drive! Drop down to ND and you have a divided limited access highway where you can zip along at 75+ MPH and do the same trip in 2 hours or less. (I recently made that trip and was astounded how difficult it was to get to Manitoba’s 2nd largest city.) American’s take for granted just how good our highway system is and how easy and quick overland travel is.

    Long story short, servicing small markets in Canada IS different and they need more flights.

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