THE VIRTUAL AIRLINE Not the answer
Posted on 07/29/2016 | About Canada
If it’s not a contradiction in terms, the ‘conventional wisdom’ in Canadian aviation has always been that Canada cannot support a third carrier and historically, at a glance, that does seem to be the case.
A line of headstones bears the names of the carriers that have attempted to compete with Air Canada and failed to stay the course. One that looked for a while like it was actually going to manage to provide Canadians with a true low cost/low fare alternative was Westjet but they too have effectively failed. Or perhaps more accurately, they have changed course and become more clone than competitor for Air Canada – now even struggling to compete on the Atlantic.
Along the way Westjet turned its back on the market it once set out to serve: Canadians who simply cannot afford to fly.
In some ways you can’t blame Westjet - it is after all a public company with a responsibility to its shareholders to produce the maximum return on their investment. And, in an uncomplicated, two-carrier market, if they and AC can discreetly control capacity to a level that keeps load factors and yields consistently high, then they are indeed keeping their investors happy.
How do they get away with it? Very simple, they enjoy the protection of The Canada Transport Act which supposedly exists to ensure that Canadians have, and I quote, “a competitive, economic and efficient national transportation system that meets the highest practicable safety and security standards and contributes to a sustainable environment that makes the best use of all modes of transportation at the lowest total cost to serve the need of its users, advance the well-being of Canadians and enable competitiveness and economic growth in both urban and rural areas throughout Canada.”
Breathe now! Lawmakers are not big on punctuation.
Overall that sounds like a noble objective – note the words “enable competitiveness.” Unfortunately competition is anything but enabled by the act’s prohibition of foreign investors from controlling more than 25% of a Canadian airline.
Ask any of the aspiring Ultra Low Cost Carrier (ULCC) startups in Canada and they will tell you how the 25% limitation has scared away some highly qualified and creditable non-Canadian investors. So while every other developed and many ‘underdeveloped’ nations have at least one ULCC offering low airfares, the CTA works diligently to maintain the incumbent duopoly’s advantage by ensuring and Canada has nary a one.
But wait a minute, what about NewLeaf? How have they managed to get around these barriers to entry for new airlines? Well, simply stated with the CTA’s blessing, they have introduced what can only be described as a ‘perceived’ air carrier by NOT becoming an airline.
While they style themselves as ‘New Leaf Travel Company’ the headlines (this week’s Hamilton Spectator) says things like “Low-cost carrier New Leaf launches with flight from Hamilton” or (Kelowna Now) “New Airline New Leaf lands in Kelowna.” Even CBC’s reference to a “new low-cost air travel company” would tend to suggest “airline.”
It would hardly be surprising therefore if the vast majority of passengers on NL’s flights are under the impression that they’re flying on a new airline: They may well have seen pictures of NewLeaf -liveried airplanes during the company’s first launch. No more. Since the CTA gave its second-time-around approval, NL has been told it can do nothing to hold itself out as an airline, so all the Photoshop images of 737’s emblazoned with a NewLeaf paint-job have disappeared from the website. Journalists can, and still do, find the old pictures on Google Images but NL passengers will be flown on Flair liveried airplanes and served by Flair uniformed cabin crews.
NewLeaf technically falls under the fuzzy description of ‘a reseller of seats’, for flights operated on their behalf by Flair Airlines, a charter service out of Kelowna BC. On a charter basis Flair provides the Boeing 737-400 aircraft, pilots, cabin crews, maintenance and insurance – all NewLeaf has to do is find the passengers and pay the bills.
A check of the NL website’s Booking Terms and Conditions shows that all reservations made through the website are “subject in all respects to the service provider carrier’s (that would be Flair’s) tariff in respect to transportation of guests.”
Should you want to take a peek at what that tariff has to say, “It may be viewed at the offices of NewLeaf Travel located at 128-2000 Wellington Avenue, Winnipeg, Manitoba.”
Alternatively it can also be found on Flair Airlines’ website - which might be easier than schlepping to Winnipeg
Essentially, as long as everything operates on schedule this is all fine… My big question however would be, “Who do I turn to (OK, I know that should be, “To whom do I turn?” but just bear with me here) when the manure hits the fan?”
As ‘the reseller’ (NewLeaf) isn’t going to have any of its own people in the airport or on the plane, it somewhat inhibits a passenger’s ability to deal directly with the people from whom they purchased their ticket. One has to wonder if Flair’s cabin crews will have a novel line like, “I’m sorry honey, I can’t help you with that. You’re going to have to contact your reseller.”
Or they could just refer an irate passenger to Flair’s tariff, Rule 21 Section C-2d which states, “Should the alternate choice proposed by the Carrier not meet the passenger’s satisfaction the Carrier will direct the passenger to contact the reseller.”
It all seems more than a tad ironic that the Canadian Transport Agency, which has fought off foreign investors wanting to put real money into properly constituted, well funded new airline operations in Canada, should now turn around and approve what has the appearance of a scantily funded and ill-defined ‘virtual airline’ that, deliberately or not, is perceived by the unsuspecting public to be Canada’s long awaited ULCC.
If the CTA thinks it is doing its job by producing anomalies like NewLeaf then they are sadly mistaken. Canada and Canadians are crying out for that third airline: Not another AC or Westjet but a properly constituted, well managed, well-funded ULCC.
Doesn’t the fact that over five million Canadians drive across the US border every year to buy seats on airlines like Spirit, Allegiant and Frontier say something to our blinkered civil servants?
Without access to foreign funding the chances are not good that we will see any real change any time soon. Let’s hope NewLeaf doesn’t have an early fall.