Canada’s airlines are in dire straights as government does nothing
There is a growing concern in Canada as a whole, and especially at the airlines themselves, that they may not be able to survive in anything like the way they operated before the pandemic began. Air Canada is considered to be a major global airline, but it looks ever more likely it simply won’t be able to come back as one as the pandemic finally breaks.
Westjet is in a similar predicament, and with AirTransat due to be incorporated into Air Canada, there is concern at how it will fit into such a depleted business.
The problem is that the Government, unlike virtually every other in the industrialised world, hasn’t put its hand in its pocket to assist the airlines, at the same time as imposing some of the harshest international travel bans anywhere, leaving the airlines with a highly restricted domestic market.
On the positive side Canada has a remarkably successful Covid prevention record, compared to the US and Brazil which have been catastrophic.
Prior to 2019, Westjet was doing extraordinarily well, adding more routes and growing its base. Air Canada was a popular and tempting choice for Americans and Europeans for long haul travel, frequently managing to steal passengers from the US airlines.
One of the biggest problems is that even if the airline was allowed to suddenly start flying again, it would take months to bring everything back on line, never mind find enough bookings to fill the seats on the aircraft they do put into service.
There’s a real possibility that while there is inevitably pent up demand, it will be short lived and requires most of Air Canada’s international destinations to have some demand themselves. If Air Canada or Westjet are so financially restrained and held back by financial restrictions, they wont have the flexibility or speed to take advantage out of making the most of any demand that might exist. Just across the border in the US there are very active, well funded, state supported airlines happy to take up the slack.
Up to 12 ex-Norwegian 787’s are planned, six have already been signed for.
Oh no…Bjoern Kjos is fronting a new low cost long haul airline
Norwegian shuttered its long haul network only a few weeks ago, finally cancelling its orders and its leases for 787’s.
Depressingly, Bjorn Koss is back. The new airline has been founded by Bjorn Kljos, Bjørn Kise, and Bjørn Tore Larsen (that’s a hell of a lot of Bjoerns). The flamboyant co-founder of Norwegian, who arguably ran it into the ground by operating a series of wooden dollar trading companies, employing the most ridiculous ‘strategy’ to expand it, that inevitably led to its demise, is again an airline shareholder. Norwegian would have collapsed covid or no covid, and its whole management structure proved so incompetent it was unable to even carry out its bankruptcy plan – just as I said it never would. It’s now back in bankruptcy protection in Norway, the US and Ireland.
Kjos has a 15% stake holding in Norse Atlantic (the other shareholders are his old buddies from Norwegian days), which has already leased 6 787-9’s – all of them ex-Norwegian aircraft. He’s being used as the front for the airline because he has always had an outsized ‘larger than life’ reputation for publicity. He’s charismatic and likeable despite his massive failure with Norwegian, which owes its demise in many ways to his simply blasting everyone and everything out of his way. If they didn’t move (and most did), he was usually able to persuade and convince through force of personality. People simply believe everything he says.
And here we are again.
There is a great deal of appreciation for why long haul low cost cannot work without serious adjustment to its business model. Norwegian flying out of Gatwick to say, San Francisco, faced opposition from BA and Virgin Atlantic. Both of them lowered their prices and redefined their product offering to match Norwegian. Then BA Chairman Willy Walsh explained why it was so easy to match so-called low cost airlines.
First off, BA had limitless resources. Secondly, UK (and pretty much most of the EU falls into the same category at different rates) Airport departure Tax and other compulsory airport fees are at a fixed amount for each seat type for all airlines, irrespective of any other costs. Let’s say a basic economy ticket has a minimum starting price of APD £180 on a 2,000+ mile trip, and Airport surcharges that total £120. That’s a £300 base price before you even start to charge for the cost to you as an airline. These costs of course are lease costs, fuel costs, landing and take off fees, gate fees, customs fees, handling fees, catering costs, staff, admin fees and so on and on.
Any airline can work out what those are by aircraft type at any given airport. So they then know at what point you break even on a flight, or start to make money on a seat by seat basis. When you publish your price on the internet, their bots scrape the data and match or undercut it – which happens in real time.
The problem for Norwegian, and it won’t be any different for Norse Atlantic, is that they have to offer a Unique Selling Point – something tangible that’s not going to be price based and makes you want to fly with them. Being ‘cool’ or the ‘in thing’ is about all they can manage. There simply isn’t the money to be anything else if they expect to make a profit. The only other method is RyanAir’s – ‘we’re cheap and we don’t give a shit about you’ approach.
The whole time you’re in danger because giants like BA are prepared to operate at a loss to beat you and they can afford to. As a startup, you can budget for that for possibly a year, anything past that, you’re in loss making territory and it’s a low road to the fate that befell Norwegian.
You might say that post-covid anything goes. And you’d be right. Would you want to go up against a knives-out and determined to get back to normal airline like Lufthansa or BA or SAS? They’re not going to want even a microbe of opposition to make up for massive losses as quickly as possible. I’m sure Kjos will blague and bluster his way into the headlines and prove a useful marketing tool, but longer term…?
Now I’m vaccinated, I’ve booked a trip for May 2022 – it was a bargain, thousands off with desperate airlines grasping for my money. Grab such bargains while you can, because the predictions are that prices are going to fly high as demand outstrips supply in 2022. Norse Atlantic might be able to gain from that for a while. Longer term, once capacity meets supply it’ll be another story.
Mask up and stay safe!