With the recent demise of Lynx Air, Flair is now the only ultra-low-cost carrier in Canadian airspace.
Travelers booking flights across Canada weigh cheap flights against the reputation and financial uncertainty that hangs over Flair for the busy summer travel season when airlines make a lot of money. Some experts say it is necessary.
The Edmonton-based airline’s CEO told Global News he believes the airline has a place among “price-sensitive” consumers, but experts say flare is ultra-low. It says it faces headwinds to make the price-fare model work in Canada.
Calgary-based Lynx Airlines announced in late February that it would close its stores and apply for creditor protection. Lynx hopes an acquisition by rival Flair will help it avoid bankruptcy, and Flair said it is eyeing Lynx jets as it plans to expand its fleet, according to filings.
Flair Airlines CEO Stephen Jones said it was a “sad day” when Lynx left the market. He said he sympathized with the people at Lynx, especially because they had a shared vision to bring to Canada the ultra-low-cost carrier, or “ULCC” model that has worked well in Europe and the United States.
However, Jones told Global News that he would not be discouraged if another company with the same model went bankrupt. Flare has seen a “significant increase” in demand for seats since Lynx’s exit, he said.
“We’re the only low-cost airline left in the market and it’s a great place to be. We really have a price-sensitive leisure market here that’s unique to us,” he says.
Outside of Canadian Flair, the options for cheap flights are limited between Air Canada’s Rouge banner and WestJet’s Swoop, which was acquired last year. WestJet also plans to downsize Sunwing and integrate low-cost carriers into its core business by October. Canada Jetline also flies to primarily warm-weather destinations from several Canadian hubs.
Flair has been active in Canadian airspace for more than 20 years, but its modern journey as a ULCC began with a 2019 rebrand. Lynx Air, formerly known as Enerjet, took to the skies as a low-cost airline during COVID-19. The pandemic hit in late 2021, and it folded just a few years later.
Jones argues Lynx hasn’t had time to build the “economies of scale” needed to succeed in the Canadian market. He said Lynx’s failure has no bearing on whether the same business model will succeed under Flare.
“When it comes to Canada, there’s nothing to say the ULCC model shouldn’t work. People love to travel and people love to trade,” he says.
Challenges of low-cost models in Canada
“It’s very difficult to operate a low-cost airline model in Canada,” Jacques Roy, a professor at HEC Montreal’s School of Logistics and Operations Management, told Global News.
The low-cost model, which originated at Southwest Airlines in the United States and later spread to Europe, is a reliable “city pair” model that allows airlines to cram more seats into the right aircraft and lower the cost per customer enough to drive down prices. ”. Roy says it’s about airfare.
He says Canada’s long distances between cities can reduce comfort on long journeys, which impacts the value proposition of domestic travel.
Roy said the main drag on the bottom line for all Canadian airlines is the high cost of airport upgrades, which make taking off and landing in the country significantly more expensive, putting pressure on airlines’ profits. .
Flair himself acknowledged the impact of landing fees at Canadian airports.
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Saving more money on long-haul travel, the airline said in a statement to Global News last week as it changes its spring schedule to increase service to sunny international destinations while reducing overall frequency. I showed that I was doing it. Flair also said it is responding to demand from Canadians for more sunny destinations in the spring.
Jones said the high fees charged for air travel in Canada are unique to the market, meaning those costs are ultimately passed on to customers in their airfare.
“The fact that airport fees are high here means that at the last minute people choose not to travel because they can’t afford it,” he says.
Duncan Dee, Air Canada’s former chief operating officer, said the decision to avoid domestic destinations in Canada during the spring season “absolutely” makes sense in terms of reducing airport fees. Ta.
He said airlines are charged a fee of about $50 per passenger for takeoff and landing at various Canadian airports, but that fee is effectively cut in half every time Flair operates an international flight. It is said to become.
The high airport improvement costs associated with Canada’s hub airports are the main reason Dee believes it will be “very difficult” to make the ULCC model work at scale in the country.
“It ends up being a very high starting point on a fare basis for many of these ultra-low-cost carriers,” he says.
“It is virtually impossible for ultra-low-cost carriers like Flair to compete with American, European and Asian airlines, which can use extremely low fares to stimulate the market.”
Dee said Lynx’s failure reflects the need for change in the Canadian market, noting that in a world where air travel infrastructure is “ultimately funded 100 per cent by fees and taxes charged to airlines. It’s the only Canadian market.” ”
Flair has faced a number of legal and financial public challenges in recent years, but CEO Jones says that’s behind much of the turmoil facing the company.
The Flair’s Canadian-made legitimacy remained up in the air for several months amid an investigation by Transport Canada, but the Flair was finally certified as meeting Canadian ownership requirements in June 2022. He made a ruling.
In November, the company was ordered to seize assets by the federal government in connection with unpaid taxes of $67.2 million. Jones confirmed to Global News that the airline still plans to pay that amount to the Canada Revenue Agency, saying the company has a “good relationship” with the tax authority.
A year ago, Flair had a number of planes seized by jet leasing managers who said the company was behind on payments. Flare subsequently sued the company and its lender. Jones insisted the seizure was “illegal” and said the company’s current fleet of 20 jets is “100 percent safe.”
And just this past weekend, Flair faced technical issues that shut down its booking platform for several days before service resumed on Tuesday.
Jones said the outage was related to a payment provider switching issue and there were no flight disruptions related to the issue.
Flair previously said it had a financial dispute related to its payment processor, People’s Trust, but Jones said it had been resolved and Flair had returned to working with the Vancouver-based financial services company. Stated.
Until speaking with Global News on Wednesday, Flair did not publicly discuss the cause of the website’s service disruption.
Dee says headlines about Flair’s financial or technical difficulties could make it difficult for the company to bounce back in the eyes of customers.
“Consumer trust in airlines that cannot manage their own communications and address the many concerns raised publicly by the media can easily be lost,” he says.
Jones doesn’t think Flair is losing its appeal to customers, noting a spike in new ticket bookings on Tuesday when the company’s systems came back online. That day was the company’s “biggest sales day in history,” he said.
“I think consumers are voting with their feet,” he says. “People have been waiting and anxious for our systems to come back online.”
Flair serves “price-sensitive customers”
Consumers are now “absolutely price sensitive” due to a prolonged period of high inflation and sharply rising interest rates over the past two years, Jones said.
“In a world where affordability is one of the biggest challenges for everyone, maintaining some level of competition in the aviation market is critical,” he says.
Dee isn’t convinced Flair has found a niche in the market yet. He said the airline has helped undercut offers from competitors on its routes, but there are limits to how much it can undercut WestJet and Air Canada, and it has a “significant impact” on the prices consumers pay. He said that it has not yet become widespread. .
And even if travelers can save some money on their flights, some may choose to stick with a major airline if they earn points in a loyalty program, he said.
Roy also said that on long-haul flights in Canada, many travelers may decide to forego flares in favor of a little more legroom.
But he agrees with Jones that consumers are now more price-sensitive and increasingly view airline tickets as a means to an end.
“They just want to get there as quickly and cheaply as possible,” he says.
Despite the challenges of the ULCC model, Roy is hopeful that Flair will become a viable third alternative to the Air Canada-WestJet duopoly.
“I hope they’re successful because I wish there was a third airline in some Canadian markets. That would really increase competition,” he says.
Jones’ own outlook for the airline is unsurprisingly rosy. He told Global News that the skies are clear for the ultra-low-cost carrier, which is looking forward to a strong summer season and a runway in place to once again expand its fleet from 2025. Told.
“I think it’s going to be a busy summer for all airlines, but definitely for Flair,” he says.
“We have great fares. We have some really great destinations. And I think this season is going to be our best season yet.”
