Why Swoop failed in Canada and what’s next for the ultra-low-cost carrier

Article content

When Swoop entered the ultra-low-cost airline market in 2018, Rick Erickson was skeptical that there was a business case for such an airline in Canada.

“I thought it would be difficult, very difficult, to launch a ULCC in Canada,” said the Calgary aviation consultant.

Article content

Calgary-based Swoop’s five-year experiment ended last weekend when the company’s owner, WestJet, announced it had absorbed the company’s aircraft into its fleet.

Article content

Aviation experts say its demise was not due to any catastrophic failure, but rather to the high cost of flying from most Canadian airports and WestJet’s recent strategic negotiations with pilots. I think it was a decision.

Swoop’s exit comes at a time when three more companies have entered the ultra-low-cost space since Swoop’s introduction, and the foothold for airlines offering underground tickets appears to be tight, Erickson said.

“The amount of stimulation you can actually do is pretty limited”: WestJet CEO

Ericsson said the 2018 launch of Swoop was WestJet’s competitive response to Air Canada Rouge, as well as an attempt to fend off other potential ULCCs. The company announced that it will start with two Boeing 737-800 aircraft and expand to 10 by 2019. When it added six more aircraft in February 2022, the company said the expansion was proof that its business plan was “paying off.”

“WestJet figured if it’s good enough for Air Canada, it’s good enough for WestJet,” said John Gradek, an aviation industry lecturer at McGill University.

WestJet CEO Alexis von Hohensbroek, who joined the company in February 2022, said the airline launched Swoop to “test the Canadian ULCC market.”

Article content

Article content

Growing in a country that serves only a handful of major cities and population centers without taking a major economic hit has proven difficult, von Hohensbroek said. .

A former European airline executive said encouraging Canadians to change their travel habits through lower prices is harder than in Europe, where ULCCs stimulate demand by offering cheaper flights than other modes of transportation, such as rail. Ta.

“The biggest difference… between what I know in Europe and what I’m seeing in Canada is that the amount of simulation that can be done is actually quite limited,” he said. Ta.

“Ultra-low fares are very difficult to operate, but in some ways they are also possible to run a sustainable business,” he added. “It was actually interesting that this wasn’t as strong as we saw from other jurisdictions.”

Article content

Even for smaller airports with lower departure costs, stimulating demand has been a challenge. “There are limits to the number of passengers that can pass through these airports,” von Hohensbroch said.

Given the high administrative costs associated with using Canada’s many airports, it is essential for ULCCs to be able to afford the high expense. “It’s always good to have a business plan… but it’s always, always, always deep pockets,” Erickson said.

Swoop survives numerous complaints, competition watchdog investigations

Swoop also struggled with complaints from passengers. The company had 14 complaints per 100 flights from April 2022 to June 2023, the third-highest number of complaints among Canadian airlines, according to Transport Canada data. Only Flair Airlines (14.9) and Sunwing Airlines (14.0), which WestJet Airlines took over in the spring, had worse records. WestJet was the next worst airline, coming in far behind at 6.4.

Gradek said a small fleet creates problems with compensation for delays and cancellations, increasing the risk of customer complaints, but WestJet is better able to avoid this problem with the 16 aircraft it acquired from Swoop. He said it would be.

Article content

Swoop was investigated by Canada’s competition watchdog in 2018 for allegedly engaging in predatory pricing, selling airline tickets for less than the cost of operating them as a way to deter competitors from entering or expanding. became the subject of

The Federal Competition Bureau said in a statement to Postmedia that its investigations into WestJet and Swoop have been discontinued. The department also said it would be inappropriate to comment on the reasons for closing the investigation.

Pilot contract may have been the key to its demise: expert

A last-minute agreement this summer that gave WestJet pilots a 24% raise over four years was likely the key to Swoop’s exit. The agreement also provides for the merger of WestJet and Swoop, and calls for comparable pay levels for pilots at both airlines.

“I think this death is partially related to the collective bargaining agreement that was signed,” Erickson said. “When you have an airline within another airline, there are always conflicts between groups of workers because one group is paid less.”

WestJet has since moved forward with plans to increase density in the rear of its 737s while offering premium seating in the front. Von Hohensbroch said the rear seats will be offered at ULCC prices.

Article content

“We came to the conclusion of what is best,” von Hohensbroch said.

What does the future hold for cheap flights in Canada?

If Swoop disappears, Flair Airlines, Lynx Air and Canada Jet Line will remain the country’s largest ultra-low-cost carriers.

Before Swoop went off the market, Gradek predicted one in four companies would close by winter 2024. The jury is currently out on what happens next, he said.

The remaining airlines convey high ambitions. Flair earlier this year withdrew its growth forecast, saying it no longer plans to have 50 aircraft in Canada by 2025 and aims to reach that level in 2027. Meanwhile, Lynx said it plans to field a 46-strong fleet by 2028.

“Can the Canadian market support all these aircraft? The answer is of course not,” Gradek said.

Some are pessimistic about the Canadian market’s ability to sustain low-cost carriers.

“This market is one of the most difficult in the world to gain a foothold and survive. It’s a classic two-airline market,” said John Grant, senior analyst at travel data provider OAG. says. Expanding quickly means owners have to “start with billions of dollars and end up with millions,” as Canada tends to hit airlines hard. means.

But Erickson said the characteristics of low-cost airlines are becoming more mainstream in Canada, primarily in terms of paying for services such as overhead baggage. Still, he said building a sustainable airline was a key challenge.

“The difficult thing is to sustain abundant funds.”

mscace@postmedia.com

X: @Mattos Ace 67

Article content