Moderators: jsumali2, richierich, ua900, PanAm_DC10, hOMSaR

 
SpaceshipDC10
Topic Author
Posts: 7054
Joined: Tue Jan 01, 2013 11:44 am

Enerjet to morph into a ULCC in 2019

Sun Dec 23, 2018 12:16 pm

Though not much is known yet.

In an interview, Morgan declined to say which routes Enerjet plans to launch, when service will start or how many planes will be deployed.


https://www.ctvnews.ca/business/enerjet ... -1.4226276
 
SpaceshipDC10
Topic Author
Posts: 7054
Joined: Tue Jan 01, 2013 11:44 am

Re: Enerjet to morph into a ULCC in 2019

Wed Dec 26, 2018 7:43 pm

They could be some sort of Ryanair in Canada: https://simpleflying.com/canada-new-low-cost-carrier/
 
Dominion301
Posts: 2839
Joined: Wed Jul 20, 2016 1:48 pm

Re: Enerjet to morph into a ULCC in 2019

Thu Dec 27, 2018 3:49 am

Looks like they'll get off the ground with the help of Indigo Partners.

Tim Morgan will have to get used to A32Xs instead of 737s.

Good luck to them and I hope they succeed. They need a new name.
 
CanadianNorth
Posts: 3262
Joined: Sat Aug 24, 2002 11:41 am

Re: Enerjet to morph into a ULCC in 2019

Thu Dec 27, 2018 12:36 pm

A few things come to my mind, all just my own opinions of course..

1 - "Aww jeez, not this s*** again". The "ULCC" concept has been tried over and over again in Canada and they rarely last long. Plus, in the last while there's been a bit of a flood of them, as we already have Flair, Swoop, in theory Jetlines, Air Transat to some extent, and now this. Transat works, but it has a long standing long-haul business to fall back on. Swoop and Rouge seem to be working for now, but in many ways they are just the big boys trying to one-up the competition, and the road to where they are now is littered with "swing and a miss" stories. Zip, Tango, Jetsgo, NewLeaf, Greyhound, probably Jetlines at this rate, the list goes on. What exactly is Enerjet going to do right that all of the others did wrong?

2 - If there was a new ULCC in Canada to bet on lately this might be the one, they already have some operational experience and appear to have a management team with some successes under their belts. But then again, Swoop and Rouge were in many ways created to stop the new LCCs before they have a chance to really get started, and they have some pretty deep pockets to borrow from if needed.

3 - Having said that, ULCCs as we know them don't really work in Canada, just the nature of the market. My understanding is airlines are required to advertise the final price by law, and quite often routes between major population centres the government and airport taxes and fees can total more than $50. Multiple times I've paid $20+ in taxes and fees on a free ticket, as in the airline didn't collect a cent from me and I still had to fork over $20 and change. Pretty hard to have the Ryanair style specials $9.99 one-way type deals when the government-imposed taxes and fees alone are more than double that and are required to be included in the advertised price.

4 - Air travel in Canada is expensive relative to other regions because travelling by air in Canada is expensive relative to other regions.
- Hangar space is astronomically expensive as hangars need to be built with insulation and good weatherproof doors, yards need to be plowed, and hangars and offices need to be heated for several months of the year.
- Operating costs are expensive because lots of de-icing fluid to pay for, lots of fuel needs to be carried as alternate airports can be hours away, ground equipment idles more in the cold, you need more heat carts and de-ice equipment around (purchasing or renting plus fuel plus maintenance on all of that adds up fast), things tend to break down more often in the cold, etc.
- Airport fees, navigation charges, taxes, etc. are expensive because we have much of the same infrastructure as other major air routes but with a very sparse population to divide the costs among.
- Northern routes are expensive to operate with a small passenger customer base and a very directional cargo customer base, and with many locals invested in northern carriers and thus more loyal than average.
- Southern routes are competitive due to the big kids AC and WS already being firmly entrenched on most of the gravy routes, plus more than 3/4 of Canada's population is within reasonable driving distance to the lower 48 of the United States, which offers much lower fares through Allegiant and such.

5 - Nothing wrong with A320s, but if Enerjet has already been operating 737NGs for a number of years I would have guessed it would make more sense to start with that? Crews already know how to operate them, engineers already know how to fix them, etc.

I like variety in our skies, so I do wish Enerjet all the best, but to succeed they're going to have to find a trick of some kind that literally dozens of past ULCC attempts have missed. Hopefully it's just not another lap in the proverbial race to the bottom.
HS-748, like a 747 but better!
 
Dominion301
Posts: 2839
Joined: Wed Jul 20, 2016 1:48 pm

Re: Enerjet to morph into a ULCC in 2019

Thu Dec 27, 2018 1:55 pm

CanadianNorth wrote:
A few things come to my mind, all just my own opinions of course..

1 - "Aww jeez, not this s*** again". The "ULCC" concept has been tried over and over again in Canada and they rarely last long. Plus, in the last while there's been a bit of a flood of them, as we already have Flair, Swoop, in theory Jetlines, Air Transat to some extent, and now this. Transat works, but it has a long standing long-haul business to fall back on. Swoop and Rouge seem to be working for now, but in many ways they are just the big boys trying to one-up the competition, and the road to where they are now is littered with "swing and a miss" stories. Zip, Tango, Jetsgo, NewLeaf, Greyhound, probably Jetlines at this rate, the list goes on. What exactly is Enerjet going to do right that all of the others did wrong?

2 - If there was a new ULCC in Canada to bet on lately this might be the one, they already have some operational experience and appear to have a management team with some successes under their belts. But then again, Swoop and Rouge were in many ways created to stop the new LCCs before they have a chance to really get started, and they have some pretty deep pockets to borrow from if needed.

3 - Having said that, ULCCs as we know them don't really work in Canada, just the nature of the market. My understanding is airlines are required to advertise the final price by law, and quite often routes between major population centres the government and airport taxes and fees can total more than $50. Multiple times I've paid $20+ in taxes and fees on a free ticket, as in the airline didn't collect a cent from me and I still had to fork over $20 and change. Pretty hard to have the Ryanair style specials $9.99 one-way type deals when the government-imposed taxes and fees alone are more than double that and are required to be included in the advertised price.

4 - Air travel in Canada is expensive relative to other regions because travelling by air in Canada is expensive relative to other regions.
- Hangar space is astronomically expensive as hangars need to be built with insulation and good weatherproof doors, yards need to be plowed, and hangars and offices need to be heated for several months of the year.
- Operating costs are expensive because lots of de-icing fluid to pay for, lots of fuel needs to be carried as alternate airports can be hours away, ground equipment idles more in the cold, you need more heat carts and de-ice equipment around (purchasing or renting plus fuel plus maintenance on all of that adds up fast), things tend to break down more often in the cold, etc.
- Airport fees, navigation charges, taxes, etc. are expensive because we have much of the same infrastructure as other major air routes but with a very sparse population to divide the costs among.di
- Northern routes are expensive to operate with a small passenger customer base and a very directional cargo customer base, and with many locals invested in northern carriers and thus more loyal than average.
- Southern routes are competitive due to the big kids AC and WS already being firmly entrenched on most of the gravy routes, plus more than 3/4 of Canada's population is within reasonable driving distance to the lower 48 of the United States, which offers much lower fares through Allegiant and such.

5 - Nothing wrong with A320s, but if Enerjet has already been operating 737NGs for a number of years I would have guessed it would make more sense to start with that? Crews already know how to operate them, engineers already know how to fix them, etc.

I like variety in our skies, so I do wish Enerjet all the best, but to succeed they're going to have to find a trick of some kind that literally dozens of past ULCC attempts have missed. Hopefully it's just not another lap in the proverbial race to the bottom.


For #1 ULCCs are very new to Canada. Everyone that preceded them was a LCC as all the defunct carriers like Jetsgo, CanJet, etc existed before ULCCs came to North America. They were all around before the days of checked baggage fees, let alone carry-on fees. As for TS or WG, they’re leisure carriers, not ULCCs, even if they do operate a few domestic routes in summer.

For #2 I agree.

For #3, the only taxes on a domestic ticket are GST/HST/PST (depending on the jurisdiction) and the domestic CATSA fee. Anything else is an Airport Improvement Fee (AIF). That’s why YXX is so attractive for the ULCCs as they don’t have an AIF, nor does YQT, whereas some airports are $30.

For #4, it is more expensive due to distance and winter weather in most of the country, but the oligopoly WS especially is so desperately trying to preserve is why fares in Canada are even higher than they should be. Just look at Canada’s cell phone oligarchs and why they don’t want a 4th national player as it usually takes for players in a marketplace before there’s true competition.

For #5, if they want Indigo’s money, they’ll fly A320s. In fact right now Enerjet barely exist. Just enough to preserve their AOC. If you check the Transport Canada database, the only aircraft currently in Enerjet’s name is a single Twin Otter. Anyone know whether they’re sub-leasing a 737 from someone at present that wouldn’t show up in the TC database? I can’t find any information on this.
 
User avatar
PatrickZ80
Posts: 4285
Joined: Tue Jul 13, 2010 5:33 am

Re: Enerjet to morph into a ULCC in 2019

Thu Dec 27, 2018 5:30 pm

CanadianNorth wrote:
3 - Having said that, ULCCs as we know them don't really work in Canada, just the nature of the market. My understanding is airlines are required to advertise the final price by law, and quite often routes between major population centres the government and airport taxes and fees can total more than $50. Multiple times I've paid $20+ in taxes and fees on a free ticket, as in the airline didn't collect a cent from me and I still had to fork over $20 and change. Pretty hard to have the Ryanair style specials $9.99 one-way type deals when the government-imposed taxes and fees alone are more than double that and are required to be included in the advertised price.


It must be a long time since you've flown a European LCC as the practice you describe here is no longer allowed in Europe. About a decade ago this was still the case, but nowadays if a flight is advertised for $ 9.99, that is the final price. It is possible to fly paying just that and nothing more. Of course airlines make a loss on that, sometimes the taxes are higher than the fare. Or put it otherwise, you got a negative fare that, after taxes, ends up being lower than the taxes itself. That is allowed. The trick is that not all seats are this cheap, just a few. They gradually become more expensive. This means that the most expensive seats compensate the cheapest seats so on average all costs are covered and the whole plane makes a profit. But those loss-making seats do make good publicity.
 
User avatar
kgaiflyer
Posts: 2741
Joined: Sat Jul 19, 2008 3:22 am

Re: Enerjet to morph into a ULCC in 2019

Thu Dec 27, 2018 6:35 pm

I distinctly remember seeing Enerjet 737 aircraft at McCarran in the past. So I looked that aspect up on Wikipedia and found the following -

"Enerjet operates the Boeing 737-700 aircraft for their routes. The first of two aircraft was painted in the Enerjet livery on the 20 October 2008. The aircraft was delivered to Calgary on 12 November 2008. These aircraft were used orders from AirTran Airways. After returning one of the 737-700 a 737-800 was obtained from Transavia in 2010. On February 27, 2017 Enerjet has cancelled the certificate of registration for its only Boeing 737-700 (C-GDEJ) and currently has one aircraft which is the DHC6-300."

I'm a frequent flyer and not an aviation professional, but my interest was peaked because of frequent trips to Calgary (WestJet's base). I'm sure WS is watching this story unfold with great interest.
 
CanadianNorth
Posts: 3262
Joined: Sat Aug 24, 2002 11:41 am

Re: Enerjet to morph into a ULCC in 2019

Fri Dec 28, 2018 12:40 pm

PatrickZ80 wrote:
It must be a long time since you've flown a European LCC as the practice you describe here is no longer allowed in Europe. About a decade ago this was still the case, but nowadays if a flight is advertised for $ 9.99, that is the final price..


Never flown on a European LCC, and the free tickets I was on were never an advertised price, I was just trying to point out that the proverbial $9 tickets aren't really a thing in this part of the world. Of course it's possible, but at that point the airline would have to be stepping in and paying your taxes and fees for you, and essentially paying to have revenue passengers to fly on your airplanes instead of collecting payment from them pretty well makes that customer pointless.

As for the 737 thing I thought they still had a -700 or two, upon further looks it seems like they might indeed just have a Twin Otter to their name. Again, I've nothing against A320s they're a nice airplane for sure, just figured with staff already familiar with the 737 line it simplify startup a little.
HS-748, like a 747 but better!
 
User avatar
intotheair
Posts: 1895
Joined: Sun Aug 31, 2014 12:49 pm

Re: Enerjet to morph into a ULCC in 2019

Fri Dec 28, 2018 12:54 pm

Dominion301 wrote:
Good luck to them and I hope they succeed. They need a new name.


I still strongly believe they should have never gotten rid of the original name: Jet Naked.
300 319 320 321 332 333 345 346 380 717 733 734 735 73G 738 739 744 752 753 762 763 772 77W 788 789 CR2 CR7 CR9 CRK Q400 E175 DC10 MD82 MD90
AA AF AS AY AZ B6 BA BR DL F9 FI GA HA KF LH MI QX SK SN SQ UA US VY WN
 
SpaceshipDC10
Topic Author
Posts: 7054
Joined: Tue Jan 01, 2013 11:44 am

Re: Enerjet to morph into a ULCC in 2019

Fri Dec 28, 2018 1:14 pm

CanadianNorth wrote:
As for the 737 thing I thought they still had a -700 or two, upon further looks it seems like they might indeed just have a Twin Otter to their name.


"Enerjet has returned to its lessors two Boeing 737-700s it used for charter flying. "

https://www.ainonline.com/aviation-news ... lcc-future
 
jimbo737
Posts: 530
Joined: Mon Jan 18, 2016 12:18 am

Re: Enerjet to morph into a ULCC in 2019

Fri Dec 28, 2018 3:43 pm

Indigo is going to discover the ULCC “opportunity” in Canada is considerably more difficult than in the other geographies it is familiar with.

Costs in Canada are considerably higher.

Taxes and various fees are unavoidable in Canada.

“Low cost” out of the key markets? In Canada? Other than YXX, there’s no such thing. Attempting a high utilization / quick turn operation out of the key airports in Canada, starting with YYZ? Ahem.

YHM as the solution to all? WS has been there since 1999 with fares as low as $29. They’ve forgotten more about the peculiarities of that market than others will ever know.

Canadians love cheap fares, but unlike Europeans and Americans, they are not prepared to go very far out of their way to take advantage of them. It’s a different psyche. Canadians aren’t going to drive 90 minutes in winter weather to Red Deer, Waterloo or from Vancouver out to YXX to save $50. Other cultures would do that as a badge of honor. Not Canadians.

Canada does not have a stockpile of relatively well located, well equipped ex NATO bases, with untapped cachement areas of 200,000+ to draw on.

Winter ops are considerably more challenging than ops in other geographies. A much higher % of the fleet will “touch” winter operations on a daily basis, (and from as early as mid Sept through mid May), than in other geographies. Operating across 6 time zones, (or more), makes life interesting too.

Seasonality and the general thinness of routes, even with heavy price stimulation, (and the burden of taxes and unavoidable fees and charges) are the bane of the Canadian market. WS made some very clever route decisions early on to mitigate this issue, but those opportunities fundamentally longer exist.

There are at least 2 well run airlines in Canada that operate out of almost every cachement area with a population of more than about 25,000 people. There are no gaping O&D opportunities as there were with Spirit, Frontier, Wizz, Volaris, Jetsmart.

Both incumbents are financially strong and have “low cost arms”, with Swoops being exceedingly low cost. The days of starting up a new venture with stage length adjusted casm 25% lower than the incumbents are long gone. Starting up with a 5% advantage, (juniority - until the unions arrive, as there is no longer a densification advantage, at least with Swoop who run 3 year old 189 seat 737-800’s).

CTA Reg’s prevent foreign ownership greater than 49%. The agency has, and will, look through the ownership structure with a fine tooth comb. They have the authority to determine “defacto control”, regardless of the myriad of paperwork created to suggest otherwise. It’s pretty obvious who’s going to ”control” the venture. It isn’t Enerjet.

The transborder opportunity can already be exploited by Frontier.....who are struggling with a couple flights a week from DEN to YYC, even with the theoretical benefit of a fleet of close to 60 tails. How long did it take WS to get to 60 tails, growing profitably all the way? Something around 13 years?

There are a slew of other land mines out there that are very familiar to those who know the Canadian market intimately and have forgotten more about the intricacies of Canada than the newcomers could even begin to know.

Anyone who believes any of these newcomers are going to school the incumbents, and WS / Swoop in particular, should be readjusting their expectations.
 
Dominion301
Posts: 2839
Joined: Wed Jul 20, 2016 1:48 pm

Re: Enerjet to morph into a ULCC in 2019

Sat Dec 29, 2018 2:33 am

jimbo737 wrote:
Indigo is going to discover the ULCC “opportunity” in Canada is considerably more difficult than in the other geographies it is familiar with.

Costs in Canada are considerably higher.

Taxes and various fees are unavoidable in Canada.

“Low cost” out of the key markets? In Canada? Other than YXX, there’s no such thing. Attempting a high utilization / quick turn operation out of the key airports in Canada, starting with YYZ? Ahem.

YHM as the solution to all? WS has been there since 1999 with fares as low as $29. They’ve forgotten more about the peculiarities of that market than others will ever know.

Canadians love cheap fares, but unlike Europeans and Americans, they are not prepared to go very far out of their way to take advantage of them. It’s a different psyche. Canadians aren’t going to drive 90 minutes in winter weather to Red Deer, Waterloo or from Vancouver out to YXX to save $50. Other cultures would do that as a badge of honor. Not Canadians.

Canada does not have a stockpile of relatively well located, well equipped ex NATO bases, with untapped cachement areas of 200,000+ to draw on.

Winter ops are considerably more challenging than ops in other geographies. A much higher % of the fleet will “touch” winter operations on a daily basis, (and from as early as mid Sept through mid May), than in other geographies. Operating across 6 time zones, (or more), makes life interesting too.

Seasonality and the general thinness of routes, even with heavy price stimulation, (and the burden of taxes and unavoidable fees and charges) are the bane of the Canadian market. WS made some very clever route decisions early on to mitigate this issue, but those opportunities fundamentally longer exist.

There are at least 2 well run airlines in Canada that operate out of almost every cachement area with a population of more than about 25,000 people. There are no gaping O&D opportunities as there were with Spirit, Frontier, Wizz, Volaris, Jetsmart.

Both incumbents are financially strong and have “low cost arms”, with Swoops being exceedingly low cost. The days of starting up a new venture with stage length adjusted casm 25% lower than the incumbents are long gone. Starting up with a 5% advantage, (juniority - until the unions arrive, as there is no longer a densification advantage, at least with Swoop who run 3 year old 189 seat 737-800’s).

CTA Reg’s prevent foreign ownership greater than 49%. The agency has, and will, look through the ownership structure with a fine tooth comb. They have the authority to determine “defacto control”, regardless of the myriad of paperwork created to suggest otherwise. It’s pretty obvious who’s going to ”control” the venture. It isn’t Enerjet.

The transborder opportunity can already be exploited by Frontier.....who are struggling with a couple flights a week from DEN to YYC, even with the theoretical benefit of a fleet of close to 60 tails. How long did it take WS to get to 60 tails, growing profitably all the way? Something around 13 years?

There are a slew of other land mines out there that are very familiar to those who know the Canadian market intimately and have forgotten more about the intricacies of Canada than the newcomers could even begin to know.

Anyone who believes any of these newcomers are going to school the incumbents, and WS / Swoop in particular, should be readjusting their expectations.


There are a whole pile of opportunities a well run (and capitalized) ULCC could exploit in Canada that WS and AC have zero interest in going after. Things like:
-adding new capacity and competition onto routes such as YOW-YWG that have less capacity on them today than 30 years ago even though traffic at both airports has doubled in that timeframe.
-airports like YKF. You mention nobody wanting to drive 90 minutes to Waterloo to save $50. Well there’s a region of over 1/2 million people that I’m sure would love to have more than 1 domestic flight a day depart from their local airport.
-the development of YHU into a ULCC airport.
-less-than-daily ULCC service to open new routes. Take YOW-YYJ for example. That’s a city pair that easily has at least 35k pax per year on it, with the majority of the demand being in summer. There is no way AC or WS will ever fly this city pair nonstop. However, an ULCC that would never fly YYJ-YVR to feed a hub might consider a route like this 3-4 weekly in summer (it’s a great route to run a red-eye on to feed an ULCC’s need (G4 aside) for high aircraft utilization). In doing so, they’d easily simultaneously stimulate O&D traffic to over 50k on the city pair. This is the type of stuff a well run ULCC can profitably do without really stepping on the big boys’ toes.

The majority of Canadians would love to see more competition. I don’t think Jimbo is one of those. A well run newcomer will not “school the incumbents” but will carve out their own niche. Average fares in Canada will always be somewhat higher than in other countries thanks to our geography, climate, taxes/fees, but the spread between the US and Canada on comparable stage lengths is often ridiculous.
 
jimbo737
Posts: 530
Joined: Mon Jan 18, 2016 12:18 am

Re: Enerjet to morph into a ULCC in 2019

Sat Dec 29, 2018 4:02 am

If there were a larger viable market out of YKF, which is really Breslau, which still lacks any public transit to the airport, and a market that WS has operated out of for close to 10 years, WS would have expanded into it. Why wouldn’t they? Same with London and Windsor.

As for the others you’ve mentioned, all of them could be operated by WS tomorrow, or at least on a summer seasonal basis. Don’t think for a second everyone of the city pairs you mentioned, and others, haven’t been carefully assessed over the past 22 years.

The problem is finding enough of these sorts of niche markets to be able to keep a new entrant’s fleet of X number of aircraft operating profitably 12 hours + a day, 7 days a week for 50 weeks a year.

Flights like YOW-YYJ westbound in the winter narrows potential aircraft.

People forget that the majority of WS’s non-stop city pairs at launch were exclusive to WS. They had a slew of safe harbors no one dared chase given WS’s massive stage length adjusted casm advantage which was easily 30%. AC/AirBC took a run at a few of them in ‘97-‘98 and were slaughtered.

No new entrant will be able to replicate this scenario. There are virtually no viable city pairs remaining in Canada that do not already have non-stop service that could support a 140-180 seat aircraft, at compensatory price stimulated fares. Remember, Canada’s population is basically the same as California’s.

There are no remaining secondary airports of consequence available to be exploited. WS launched YXX in 1997 and YHM in 1999. YQQ to Alberta was also added in 1999. YHU was looked at and rejected. Anyone recall Intair? I’ve seen some pretty sexy looking decks, (most written by US analysts) extolling various opportunities in Quebec, as, statistically at least, it appears underserved. Anyone who’s spent anytime in the industry in Canada understands why this is the case. If someone wants to blow their brains out trying to set up a domestic hub at YHU, I say “fill yer boots”.

Both AC and WS are massively more efficient than the AC/CP duopoly 22 years ago. WJ still maintains a healthy casm advantage over AC, and Swoop’s fully allocated casm on an asl around 1,000 miles is currently well under 7 cents. Some may say it’s closer to 6 cents. This is not a “fat, dumb and happy” operation that most of the ULCC’s have been able to exploit elsewhere in the world.

Low fares require structural low costs. They also require a solid core of passengers paying fares that are significantly higher than the rock bottom advertised fares to get the average fare up to where it needs to be. Finding those people in a population of 35 million, vs 10x or greater that population in the US, Europe or Asia, is no easy task.

The various levels of government, together with former government services that are now privatized, have collectively ensured that Canadians will never see fares that are as low as what’s seen in the US and Western Europe, no matter who’s pumping sunshine.

Revenue Canada / the Cdn Gov’t has a very different view of airline travel than other more enlightened governments in virtually all the rest of the world. Their attitude remains firmly planted in the 1950’s where “only rich people can afford to fly, therefore they can afford to pay the taxes and fees we layer on them”.

Anyone believing they can dance around these taxes and fees, (and I’ve seen some very interesting arbitrage schemes theoreticised), the reality is that if someone found a hole to be exploited, the hole would be shut so fast by an order in council, it’d make your head spin.
 
User avatar
northstardc4m
Posts: 3400
Joined: Fri Apr 28, 2000 11:23 am

Re: Enerjet to morph into a ULCC in 2019

Sat Dec 29, 2018 5:16 am

Dominion301 wrote:
There are a whole pile of opportunities a well run (and capitalized) ULCC could exploit in Canada that WS and AC have zero interest in going after. Things like:
-adding new capacity and competition onto routes such as YOW-YWG that have less capacity on them today than 30 years ago even though traffic at both airports has doubled in that timeframe.
-airports like YKF. You mention nobody wanting to drive 90 minutes to Waterloo to save $50. Well there’s a region of over 1/2 million people that I’m sure would love to have more than 1 domestic flight a day depart from their local airport.
-the development of YHU into a ULCC airport.
-less-than-daily ULCC service to open new routes. Take YOW-YYJ for example. That’s a city pair that easily has at least 35k pax per year on it, with the majority of the demand being in summer. There is no way AC or WS will ever fly this city pair nonstop. However, an ULCC that would never fly YYJ-YVR to feed a hub might consider a route like this 3-4 weekly in summer (it’s a great route to run a red-eye on to feed an ULCC’s need (G4 aside) for high aircraft utilization). In doing so, they’d easily simultaneously stimulate O&D traffic to over 50k on the city pair. This is the type of stuff a well run ULCC can profitably do without really stepping on the big boys’ toes.

The majority of Canadians would love to see more competition. I don’t think Jimbo is one of those. A well run newcomer will not “school the incumbents” but will carve out their own niche. Average fares in Canada will always be somewhat higher than in other countries thanks to our geography, climate, taxes/fees, but the spread between the US and Canada on comparable stage lengths is often ridiculous.


If Canadians were so keen on new entrants NewLeaf would of soared instead of scrapping out a few months until Flair took over the business model only to find themselves now on the brink. Jetlines would of launched already and be soaring but instead has been stuck in an extended "coming soon" mode for almost 2 years and is only very slowly approaching first service. Consumers in Canada are extremely hard to sway off of their established providers in any industry, but love to bitch and moan about the service they receive... just look at the cellular carriers, how many people actually moved to Wind/Freedom? Cityfone? Videotron?... how many people still bitch about Rogers/Bell/Telus... and yet all 3 report year on year increases in subscribers to wireless service and ARPU. And if thats not enough look at Internet providers, package delivery, supermarkets, and so on. Truth is I really doubt as much as people complain that anything more than a thin margin will be looking to ULCCs... there will be a very few number of routes where they work but not THAT many, and Rouge and Swoop are ready to knock them back on any they get traction on. Yes there is a niche but that niche is extremely small and teeters between 2 very competitive and larger niches: Mainline and vacation. Mainline AC and WS can through yield management keep just enough cheap seats available in any domestic pair to erode ULCC profits. And vacation, most ULCC potential customers are flying south, not east/west, especially in the winter. Now while Sunwing and Transat are not ULCCs they are catering to the all inclusive package deals which will block the ULCC model from being effective in many "snowbird" destinations, and competition from near-border US airports like BUF, GTF, BTV, etc will erode available customers to US destinations... Not the mention the much higher fees for trans-border flights.

So... while Enerjet might get a bit of something going don't expect anything amazing. Indigo is going to be looking to many "untapped" markets to find homes for the huge number of A32xNEOs they have coming, but Canada isn't going to be a huge market for them. Even with cheaper cost structure the ULCCs are not going to get that big of an advantage over the incumbents, add to that the limited customer pool, the long distances, the high fees, higher fuel costs... and jimbo was pretty much right on with his first sentence.
Those who would give up Essential Liberty to purchase a little Temporary Safety, deserve neither Liberty nor Safety.
 
ACDC8
Posts: 7878
Joined: Thu Mar 10, 2005 6:56 pm

Re: Enerjet to morph into a ULCC in 2019

Sat Dec 29, 2018 9:41 am

All the airports of interest have more than enough capacity. Airports that aren't served, aren't served for a reason.
A Grumpy German Is A Sauerkraut
 
jimbo737
Posts: 530
Joined: Mon Jan 18, 2016 12:18 am

Re: Enerjet to morph into a ULCC in 2019

Sat Dec 29, 2018 10:01 pm

There is an old Jetlines NDA’s floating around in my files dated from 3Q 2013.

The plan is just as dumb today as it was back then, which is why they’ve struggled immensely to raise any cash over the past 6 years.
 
AirNovaBAe146
Posts: 133
Joined: Sun Jun 08, 2008 6:36 pm

Re: Enerjet to morph into a ULCC in 2019

Sun Dec 30, 2018 1:36 am

To all the information above, I'll add WS' new pilot contract allows for the expansion of Swop to 30 tails. I'd fathom a guess that WS would much rather be battling Flair than Indigo / Enerjet in the Canadian skies. All the financial reports I read on Flair is that they are struggling and a very beatable opponent. They are burning through money at an alarming rate, and operate an older-generation fleet of 737-400s that are prone to mechanical issues. They have little spare aircraft capacity, and there have been some ugly scenes the past few years when their aircraft have a technical issue requiring a multi-hour delay.

That being said, now that WS can increase Swoop's size, they certainly will, especially with Indigo on the horizon. 30 Swoop tails should be the nail in Flair's coffin. But they aren't the real opponent. Indigo / Enerjet, what with their buckets of cash and 400+ Airbus 320 orders is. Best be ahead of the curve and flood the marketplace, vs leaving the door even slightly open.

The other thing you'll see Swoop starting to do is significantly more southern flying. Indeed, a compelling argument could be made that Swoop's No. 2 opponent is Sunwing (not Flair). And that their No. 3 opponent is Air Transat (not Flair). WestJet finds it hard to compete to many vacation destinations with their -800s having either 168 or 174 seats, and Sunwing having 189 seats (Transat has the high-density 189 seat configuration and a few with 10 club seats and 174 economy). Even with some yield differential for the WestJet Plus section, it doesn't justify a business class product in all markets, all the time.

It has been often said that a bird with a seat strapped to its back could make $ flying in Canada in the summer months. Being able to balance a profitable summer season with vacation destinations in the fall / winter / spring at the lowest CASM of any airline in Canada should make Swoop a formidable competitor.

Last but not least - Swoop is about WestJet positioning themselves ahead of the jackals who are or will be attacking them (Flair, Indigo / Enerjet, Canada Jetlines), plus fighting back against some resilient competition in the marketplace (Sunwing, Air Transat). It will be interesting to see how it all shakes out when Swoop is at 30 tails in ~a year or two.
 
jimbo737
Posts: 530
Joined: Mon Jan 18, 2016 12:18 am

Re: Enerjet to morph into a ULCC in 2019

Sun Dec 30, 2018 4:56 pm

I’ve never seen a viable business plan where the idea is to use shareholders / private equity to underwrite losses to subsidize cheap fares in perpetuity in order to gain traction in a market.

I’ve also never met a venture capitalist who enjoyed losing money.

With the new contract, Swoop will relatively quickly expand to 30 tails, likely all 189 seat 737-800’s, with a casm, net of fuel, around 6 cents with an asl around 1,000 miles.

Anyone thinking they’ll be able to launch into the small Cdn market with a stage length adjusted cost structure meaningfully lower than that is pumping some serious sunshine.

WS has an advantage close to 40% at launch. The days of a new entrant garnering even a fraction of that advantage are long, long gone in Canada. That’s the macro situation guys looking to launch LCC’s / ULCC’s need in order to be successful. They scour the world looking for those scenarios. Enerjet has been assessing the ULCC market for about 10 years and Jetlines since at least 4Q 2013. If it ever existed back them, (I doubt it), it no longer exists now. The ship has sailed.

Swoop / WS have been doing this for going on 23 years, which is pretty close to how long SW was around when WS started in ‘96, albeit in a market about 1/11th the size of the sandbox Southwest gets to play in. WS knows the Cdn market intimately and has buckets of RMS data going back decades available to it.

Back in ‘96, SW still had vast tranches of the US to conquer given the immense size and breadth of the market. Unless there are a dozen or so markets in Canada with populations north of 150,000+ people that have been entirely forgotten by the incumbent airlines, I don’t see much in the way of low hanging fruit available. Indeed, what’s left is akin to a few pieces of fruit at the top of the tree on spindly little branches. There’s not enough to justify the launch of an entire new airline, operating high capital cost new iron that needs 12+ hours a day utilization, 7 days a week, virtually 365 days a year.

It’s an very different scenario to what was still prime for the pickin’ in the US in ‘96, as ValuJet / Air Tran, Spirit, Allegiant and Frontier 1.0 and 2.0 figured out, let alone in Canada, with $15 oil and fully refurbished 737-200’s that cost less than $5m a copy.

They’ll be those who suggest that with price stimulation, markets will expand. That is indeed the case, but price stimulation has to be on a sustainable, profitable basis, not the usual “lose a little on each person but make it up on volume” game that occurs with stunning regularity.

Sustainable price stimulation requires sustainable low costs, and costs significantly lower than the incumbents. At 6 cents net of fuel, I don’t see it. I’d be very carefully checking the logic and assumptions in the economic models of those who believe it can be achieved.

There’s no getting around the myriad of taxes, fees and charges heaped on top of fares charged in Canada, all of which have to be included in the advertised fares. Sure, US carriers have been able to drive ancillaries north of $50, but that hasn’t happened in Canada, where the Canadian sense of entitlement is alive and well, and significantly more engrained in consumer psyche than south of the border.

The market WS turned upside down starting in ‘96 is dramatically different than the market in 2019.

I can categorically say that if the same people who got together starting in June ‘94, and operated the first sched flight less than 2 years later, got together today to assess the viability of a WS 2.0, given the current landscape in Canada, the conversation would be a very short one.

For these reasons, WS will be wary of competition, as they have always been, and will be ruthless, as they always are, but I doubt they are shaking in their boots at the prospect of new players entering a finite market they don’t really understand, all of whom have been dancing around the edges for literally years tying unsuccessfully to raise the necesssry capital to do so.
 
Armodeen
Posts: 1265
Joined: Wed Aug 28, 2013 10:17 am

Re: Enerjet to morph into a ULCC in 2019

Sun Dec 30, 2018 9:42 pm

CanadianNorth wrote:
A few things come to my mind, all just my own opinions of course..



3 - Having said that, ULCCs as we know them don't really work in Canada, just the nature of the market. My understanding is airlines are required to advertise the final price by law, and quite often routes between major population centres the government and airport taxes and fees can total more than $50. Multiple times I've paid $20+ in taxes and fees on a free ticket, as in the airline didn't collect a cent from me and I still had to fork over $20 and change. Pretty hard to have the Ryanair style specials $9.99 one-way type deals when the government-imposed taxes and fees alone are more than double that and are required to be included in the advertised price.



No opinion on the startup or their chances, but I thought I would point out that the UK (and the EU as a whole) mandates this exact thing and that hasn't stopped EasyJet, Ryanair etc. The Ryanair £9.99 specials are loss leaders, you don't pay anything other than that in terms of taxes.

That's all.

*edit* somebody beat me to it
 
wrongwayup
Posts: 442
Joined: Thu Jan 07, 2016 6:23 pm

Re: Enerjet to morph into a ULCC in 2019

Mon Dec 31, 2018 2:33 am

jimbo737 wrote:
I can categorically say that if the same people who got together starting in June ‘94, and operated the first sched flight less than 2 years later, got together today to assess the viability of a WS 2.0, given the current landscape in Canada, the conversation would be a very short one.


Funny you mention that. Tim Morgan was shareholder #4 in Westjet.

http://aircraftworks.ca/crew/tim-morgan/72.html
 
jimbo737
Posts: 530
Joined: Mon Jan 18, 2016 12:18 am

Re: Enerjet to morph into a ULCC in 2019

Mon Dec 31, 2018 5:49 am

Morgan coordinated the flight ops side of the equation and did so very well.

I can’t recall any airline that has failed directly or even indirectly because of failures in its flight ops department. WOW and Norwegian have serious issues, but flight ops isn’t one of them.

They fail because of poor initial strategic and tactical commercial planning. That was done by others at WS.

Had the guy who did the planning analysis over about 18 months determined there was no realistic chance of success, it would have been communicated to the big kahuna and that would have been the end of WS. They wouldn’t have bothered attempting to raise the capital. No money, no airline.

Input from a fledging flight ops, IT/Customer Care was immaterial at that point. They didn’t enter the picture until after the money had been raised, after July 1995 and in earnest in Sept 1995.

With a fair bit of insight, I would suggest to you that given the current lay of the land in Canada, if the same decision makers that conjured up WS in 1994-1995 were contemplating doing the same thing in 2019, the analysis would result in the project not being pursued.

My previous posts allude to some, but certainly not all of the reasons why.

Like it or not, the ULCC ship in Canada, with a population of just 35m, the same as California, has sailed.
 
SpaceshipDC10
Topic Author
Posts: 7054
Joined: Tue Jan 01, 2013 11:44 am

Re: Enerjet to morph into a ULCC in 2019

Mon Apr 08, 2019 3:39 pm

Any news on their current status and operation launch?
 
vrefplus5
Posts: 24
Joined: Thu Dec 13, 2001 7:31 am

Re: Enerjet to morph into a ULCC in 2019

Thu Apr 18, 2019 7:48 pm

Popular Searches On Airliners.net

Top Photos of Last:   24 Hours  •  48 Hours  •  7 Days  •  30 Days  •  180 Days  •  365 Days  •  All Time

Military Aircraft Every type from fighters to helicopters from air forces around the globe

Classic Airliners Props and jets from the good old days

Flight Decks Views from inside the cockpit

Aircraft Cabins Passenger cabin shots showing seat arrangements as well as cargo aircraft interior

Cargo Aircraft Pictures of great freighter aircraft

Government Aircraft Aircraft flying government officials

Helicopters Our large helicopter section. Both military and civil versions

Blimps / Airships Everything from the Goodyear blimp to the Zeppelin

Night Photos Beautiful shots taken while the sun is below the horizon

Accidents Accident, incident and crash related photos

Air to Air Photos taken by airborne photographers of airborne aircraft

Special Paint Schemes Aircraft painted in beautiful and original liveries

Airport Overviews Airport overviews from the air or ground

Tails and Winglets Tail and Winglet closeups with beautiful airline logos