When it rains it pours. After years of no significant startups in the US, we now have a third entry in a very short time after Avelo and Breeze — or least, I’m told Breeze will actually, eventually, maybe, probably start. Connect Airlines has less cash and less flash, but if one thing goes right for the airline, it has a fighting chance. Today, let’s take a look under the hood now that the airline has filed its plans with the Department of Transportation.
The whole reason for Connect’s existence is to carry travelers from Toronto/City Airport to the US and beyond. But wait, doesn’t Porter already do that? Sort of. Porter DID do that before it shut down at the onset of the pandemic, but Porter was a mostly closed network. Its only significant airline partner was JetBlue. The other four — Azores, El Al, Icelandair, and Qatar — didn’t add up to much. And Porter focused primarily on Canada. Connect’s plan is different.
Instead of relying on local business travelers that are likely primarily Canadian, Connect is establishing itself as a US-based airline but one with Canadian crews so it can pay them less. Is that even legal? It definitely is if the airline is flying between the US and Canada, but there are other parts that confuse me.
Connect will take some old flybe Q400s for cheap — it has secured two and hopes to get 3 more early next year — and will fly them around on short-haul routes. Which routes? Well, Connect recently filed some additional docs with its initial plan.
The airline will stat with Toronto/City to Baltimore, Boston, Chicago/O’Hare, New York/JFK, and Philadelphia. It will also fly beyond Boston to Philly and Baltimore, which is where I get confused. As a US airline it can do this, but could it really fly it with Canadian crews? That seems unlikely, though admittedly I don’t know the actual law on this if it’s sold as a continuation of the flight from Canada.
If you’re wondering about why these cities were chosen, I think there’s a pretty clear answer. The key to all of Connect’s success is in this one sentence from the cover letter in its filing with DOT.
Furthermore, the applicant is in advance discussions with a U.S. major carrier for the provision of “CPA” flying utilizing the Applicant’s planned turboprop aircraft.
A CPA agreement is what nearly all regional flying in the US falls under. The major airline pays a fixed fee to the operator to fly the airplane under its own brand. Variable costs like fuel are usually passed through. If this is real, then it can’t be United which is in bed with Air Canada. Delta is unlikely thanks to its WestJet partnership. But American? Well, isn’t it convenient that these flights go to American hubs and focus cities (excluding Baltimore).
Connect also talks about codesharing with other airlines, and that’s nice but it’s not going to make the airline succeed like a CPA would with one airline. If Connect flies as American Eagle, then it’ll be just fine. If not, well, it’s going to have a really tough time.
The airline has a complex ownership structure. Its parent is Waltzing Matilda… I’m not kidding. That refers to the Australian song Waltzing Matilda, probably because founder CEO John Thomas is an Aussie. You might be wondering how an Aussie is allowed to start a US-based airline. Wonder no more. He has dual citizenship.
But Waltzing Matilda is a current charter operator that apparently grew out of the owner’s private jet. Must be nice. Waltzing Matilda will own 51 percent of a new company while investors will own the other 49 percent. That company will own the Connect Airlines brand, but Connect will then contract with Waltzing Matilda to operate the aircraft in the schedule. So I guess it would be American Eagle operated by Waltzing Matilda for Connect Airlines? Uh, yeah. That sounds like a great opportunity for transfer pricing shenanigans that I as a minority owner would not appreciate.
Anyway, they are only trying raise $10 million for this venture which is not enough for any kind of start-up… unless it has guaranteed profits built in with a CPA deal.
You can see how this kind of deal would be good for American. Toronto/City is very convenient to downtown and is a good business airport, but it can only accommodate turboprops. None of the big three have contracted for any turboprop flying for quite some time, so existing operators wouldn’t be looking to fly it. With American lacking a Canadian partner, this would be a good way to get in there, especially to compete with United and Air Canada.
If the CPA happens, then great. This has a real chance. If not? Well, then the airline is going to need a lot of luck to end up better than the swagman in the song.
