It’s that time of year again; when the clocks turned back on November 5th, the start of the “SnowBird” season officially began. In the lead up to the busy holiday schedule, Canada’s flag carriers have brought their battle for market share to Canada’s media outlets. Within a month of each other, both Air Canada and WestJet made major announcements for 2018.
On September 27th, 2017 in Calgary, WestJet officially launched its new ultra-low-cost carrier Swoop. With operations scheduled to begin in the summer of 2018, WestJet is hoping that its subsidiary will “Swoop” onto the market and capture some of the traffic currently held by AC’s Rouge and Flair Airlines.
Possibly in response to WestJet’s announcement, Air Canada chose to increase capacity from its Eastern hubs, in Toronto (YYZ) and Montreal (YUL), to Western Canada. The launch of seasonal flights to Nanaimo, Kamloops, and Victoria are scheduled to begin in June of 2018. The timing is no coincidence; Air Canada’s strength in Western Canada could be under threat as WestJet grows its capacity in BC and Alberta through Swoop. Air Canada’s low-cost subsidiary, Rouge, is scheduled to operate these flights with its fleet of Airbus A-319 aircraft. Rouge’s low-cost structure allows Air Canada the opportunity to market the flights to price-conscious vacation travelers.
Now that WestJet has chosen to launch its own airline within an airline (AWA), it will be interesting to see how Swoop navigates Canada’s historically unstable market. When the carrier was launched in September, it immediately became clear that WestJet was rigidly following the “AWA” blueprint: employing a catchy, marketable title, making extensive use of bright colors, and choosing to operate high-density aircraft between secondary markets.
Unfortunately, while WestJet was busy filling the void left by Canadian Airlines, they may not have paid attention to the commercial failures of its competitor. In 2004, Air Canada Tango and Zip, two “AWAs” launched by Air Canada to neuter WestJet’s growth in Western Canada, ceased operations following heavy losses. Far from halting WestJet’s growth, both carriers had in fact diluted Air Canada’s mainline operations and their downgraded cabin products hurt AC’s established brand. Why then would WestJet believe that they can get more from their own “AWA”?
I believe that because WestJet is marketing Swoop as an ultra-low-cost carrier, something that Canada has historically lacked, they are trying to benefit from, initially, existing as an unknown entity. People are unsure exactly what to expect. Unfortunately, Swoop doesn’t seem to offer anything new to the product concept: high-density aircraft, severely reduced seat pitch, secondary destinations, high ancillary fees, and a planned separation from the parent carrier are all elements observed in historical ULCCs. The carrier exhibits the financial parody of wanting to be separate from your financier while at the same time needing to remain close to benefit from scale economies.
When I attended Waypoint Aviation’s “meet and greet” in Vancouver, I happened to pick up some information about Swoop. From what my source was able to reveal, WestJet is more concerned about losing market share to a new ULCC than Air Canada’s Rouge. WestJet has become a defacto legacy carrier; I wouldn’t be surprised if they have ample resources to pour into a subsidiary if it meant salvaging market share. However, they should be careful, as they demonstrated to Air Canada: “What doesn’t kill you makes you stronger”.
On December 1st, about a month after WestJet’s launch of Swoop, Air Canada announced three new routes to Vancouver Island and the Thompson Valley. These two regions have long been popular tourist destinations in BC, and the new routes were widely celebrated by the local media. Scheduled to begin in June 2018, Air Canada plans to serve Kamloops and Nanaimo from its hub in Toronto, and Victoria from Montreal. The flights will be operated by Rouge and its fleet of Airbus A-319s (W12 Y124).
In Victoria (YYJ), the new seasonal route complements Air Canada’s existing daily flight to Toronto. People living in Victoria will now be able to fly direct to Montreal and avoid the congestion at Toronto’s Pearson Airport. This past summer (2017), the traffic between Toronto and Victoria rose to the point where a second daily service was added for the summer months. Based on that piece of information, I wouldn’t expect the seasonal service to Montreal to negatively impact the year-round Toronto flight. Montreal offers a wealth of connections to Continental Europe, Africa, and the Middle East; a number of these destinations are unique to the airport, catering to Quebec’s large Francophone population.
I must admit that my first thought when I learned about the Nanaimo-Toronto flight, was “Is the runway in Nanaimo even long enough?” While I was quick to celebrate the Montreal-Victoria flight, I struggled to make my mind up on the Nanaimo and Kamloops flights. For both cities, the addition of seasonal service to Toronto should enhance their appeal to people in their extended catchment area, particularly Northwards. If the price is right, I can completely understand why people would be willing to drive a couple hours extra to avoid connecting through Vancouver or Calgary. However, after considering the matter, I was surprised that Air Canada chose to serve Nanaimo and Kamloops instead of Comox and Prince George. Both of the latter airports have a tighter catchment area and they extend further into the North, farther away from substitute airports (i.e. Victoria and Kelowna).
I was particularly surprised by the snub to Prince George; partly because of the established hub and connections provided by Central Mountain Air (throughout Northern BC and Alberta) and secondly by the fact that travelers to Toronto would have to head south to Vancouver before heading east. I actually got to the point where I decided to reach out to Air Canada to try and learn more about their decision. I’ll hopefully be able to provide an update on this in the next few weeks.
In the meantime, I’m planning to put together a piece on WestJet’s Capacity Purchase Agreement with Pacific Coastal, maybe with a brief discussion on their JV with Delta. I’m also in the middle of a long-ish post about the C-Series Saga which I haven’t got a timeline for just yet.