In a big press conferences in various cities across Canada, New Leaf Airline was introduced to us as an ultra-low-cost airline.
This would imply that its fares will be even lower than the so called low cost airlines, which Westjet started out as, and often still professes to be.
They gained massive media attention across the country and, according to them, sold loads of tickets for their flights. Then industry, self-proclaimed industry watchdog, Gabor Lukacs stepped in to question the legal right of New Leaf to fly and still have passengers protected in the same way they are on other airlines.
So New Leaf stopped selling and returned all the monies they had already collected from potential passengers.
Presuming they get properly licensed going forward, how will New Leaf offer us lower prices to fly?
According to Jim Young, President and CEO of the New Leaf Travel Company, it will be done by initially servicing regions that are underserved, with airports whose landing fees and attendant costs are substantially lower than the major airports in the nation.
To a great degree, they appear to be following a similar strategy as initiated by Westjet Airlines when they launched their early schedules during the 1990’s, flying to underserviced regions and airports at the time.
Fairly early on, it used the John C Munro Hamilton International Airport as its hub, connecting eastern and western cities.
Similarly, Westjet launched with an extremely low pricing strategy that certainly made Air Canada executives sit up and take notice. I am certain they never gave this upstart a chance, with a pricing concept they likely perceived would drive Westjet into bankruptcy, sooner rather than later.
Young also believes that New Leaf will be successful because of its menu driven pricing. As stated, “Your fare gets you the two essentials: a seat and a seatbelt. The rest is up to you.”
The rest falls into the category that has come to be known as ancillary fees. It became common with low cost US carriers like Allegiant and Southwest Airlines before it. In the past few years it is a strategy that has been totally adopted by our Canadian carriers.
What has this meant? No more free checked in bags, extra charges for the most popular seats, and strict adherence to weight and size restrictions that agents once turned a blind eye to.
New Leaf is taking it a step further by charging for carry-on bags, printed boarding passes, seat selection, and to our understanding, but not yet confirmed officially, for the free glass of pop that the flight attendants distribute on competing airlines.
I predict that it will not be long before a charge for carry-on bags will be initiated by our other Canadian carriers, in order to show lower price point offerings in their advertising and online marketing as well.
New Leaf, technically, does not own aircraft. They have a lease arrangement with Flair Airlines of Kelowna, who in turn have a similar relationship with KF Aerospace, formally known as Kelowna Flightcraft.
It is because of this arrangement that the question arises as to their proper licensing since the collector of the monies has not direct financial link, as others do, to the service.
Presumably this kind of arrangement would allow New Leaf to operate successfully, without bearing the huge costs of purchasing new aircraft.
While they announced great plans for expansion into other Canadian markets, as well as for flights going south of the border, their first itineraries include only seven cities. Winnipeg, Saskatoon, Hamilton, Kelowna, Abbotsford, Halifax and Regina.
And while their launch strategy appears sound, they are entering an industry crowded with failure, in Canada and around the world. Even as falling oil prices, theoretically, should be good for the industry, in 2015 several airlines around the world went bankrupt.
Last year, the very large U.S. Airways Group went into bankruptcy protection in August. Sky Greece went bankrupt in September, as did a number of smaller local and national airlines including Air Croatia, Estonian Air, Nordic Global, and others who shut down operations before they even started.
The Canadian landscape has not fared much better. Remember Greyhound, the last airline that choose Winnipeg as its head office. Or CanJet, Skyservice, Canada 3000, or Zoom just to name four.
Add to that, two other Canadian companies have announced they will be launching low cost carriers in the near future.
On the positive side, I have always referred to Westjet Airlines, from the well-known children’s story, as the little engine that could. It has now become Canada’s number two carrier, placing around 20 million passengers in their seats last year. It has become one of the top 10 airlines in North America.
Hopefully, Young and his investors have deep pockets, as neither Air Canada nor Westjet are likely to stand idly by and let an upstart steal market share.
So long as they do, and with what looks like a sound strategically planned launch, on a pattern that in many ways mirrors the early thinking of the Westjet executives, they too may rise to become a major player in the Canadian aviation market.
For Winnipeg and Manitoba, this could prove to be an economic windfall. For travelers, it could become a first choice option if the total price for flying is consistently lower than its competitors, new and old.
Competition is good for the consumer, and in the end for the industry as well. I hope they are able to iron out the challenges placed in front of them and go back to market soon, regardless of the mountain they will face.
Hopefully they too can become the little engine that could.