CANADA: WestJet Airlines And Scoop Accused Of Predatory Pricing

The Federal Court of Canada has ordered a second senior employee at WestJet Airlines Ltd. to testify under oath in a predatory pricing investigation into WestJet and its budget subsidiary, Swoop, by Canada's competition watchdog.

The inquiry, launched by the Competition Bureau in the fall, concerns allegations the two airlines used anti-competitive practices to crowd out B.C.-based upstart Flair Airlines from at least three routes last year.

Federal Court Chief Justice Paul Crampton has ordered WestJet corporate planning manager Michael Claeren to be examined by Canada's commissioner of competition, citing Claeren's former role as a senior leader of revenue and pricing at Swoop.

He is set to appear next month alongside WestJet vice-president John Weatherill, who the Federal Court previously ordered to come before a presiding officer to explain the airline's tactics.

The commissioner launched the inquiry to investigate allegations the parties have abused their dominant position in the provision of air transportation services by engaging in predatory pricing practices on certain routes in Canada, according to a March 27 affidavit from Xavier Mercier, a senior officer at the Competition Bureau.

Flair alleges predatory pricing cost airline $10 million.

Predatory pricing is when a company offers services below break even costs to hobble a competitor, along with an expectation to recoup losses through future price hikes, according to Competition Bureau guidelines.

In this case the accusation applies to routes between Edmonton and the cities of Abbotsford, B.C., Hamilton, Ont., and Winnipeg. On the Hamilton route, Swoop advertised all-inclusive fares for as low as $69 starting last June, court filings state.

Flair Airlines chief executive Jim Scott has said the strategy cost his ultra-low-cost carrier about $10 million between mid-June and mid-October, placing it in jeopardy.

WestJet has said it is compiling information in response to the probe, which has seen piles of court ordered documents and data from the two Calgary based airlines handed over to the Competition Bureau.

Air Canada and WestJet control about 90 per cent of the domestic market and 70 per cent of the transborder market, says David Tyerman, an industry consultant who works with Enerjet, a charter airline aiming to launch as a budget carrier this year.

WestJet's attempts to retain control over ultra low cost flights amount to a pretty aggressive attempt to protect market share and keep new entrants out of the market, Tyerman said in an interview.

The accusation applies to routes between Edmonton and the cities of Abbotsford, B.C., Hamilton, Ont., and Winnipeg. On the Hamilton route, Swoop advertised all-inclusive fares for as low as $69 starting last June, court filings state.

The business models of Canada's two largest airlines make ultra-low pricing on certain routes without incurring a loss tough to fathom, he said, pointing to the cost of premium seating and lounges.

Both Air Canada and WestJet have limited their budget products to certain markets to avoid cannibalizing most of their full-price markets.

It seems unlikely that Swoop and Rouge can achieve truly lowest costs, given labour costs at the incumbents and other potential cost differentials, Tyerman said in an email.

He also noted the Competition Bureau does not have a mandated time frame for the WestJet investigation and called for prompt enforcement of anti-competitive rules.


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CANADA: Swoop To Cleared To Kickoff Hamilton To Abbotsford, British Columbia Flights

Swoop says it plans to charge less for tickets because its costs will be much lower, and the planes will come with no free perks.

Competition is heating up for Canada's most price-sensitive travellers as WestJet Airlines gears up to launch the country's second ultra-low cost airline Wednesday.

Swoop, an offshoot of WestJet Airlines, will make its maiden flight on its pink and white aircraft before the sun rises in Hamilton, Ont. on a trip to Abbotsford, B.C.

From my perspective coming into this fresh, I've been in Canada four months now I personally believe there's a huge opportunity in Canada, said Swoop president Steven Greenway.

Greenway is an Australian native who has worked in executive positions at airlines including Japanese low-cost carrier Peach, Virgin Blue, Virgin Atlantic and Qantas.

Swoop marks his sixth airline startup.

By discounting travel, Swoop, Flair Airlines and others are trying to repatriate the more than five million Canadians who cross the border to catch flights from airports in Buffalo and Plattsburgh, N.Y., and Bellingham, Wash.

From our perspective there's the opportunity to fill a gap, there's an opportunity to stimulate demand, there's an opportunity to welcome Canadians back from crossing the border. We believe there's a significant enough market to be able to thrive, Greenway said.

He expects competition will increase significantly over the next 12 months as Canada Jetlines gears up to join Swoop and Flair in offering deeply discounted fares along with charges for everything from a onboard drink to carry-on and checked baggage.

Flair welcomed the extra competition.

We think that having more people in the space helps promote the fact the space exists and will work to each other's advantage, executive chairman David Tait said in an interview.

I don't think Canada's big enough for half a dozen players in this space, but there's certainly plenty of room for two and maybe three.

Meanwhile, Tait said Flair plans to move its headquarters to Edmonton from Kelowna, B.C., over the coming months to help promote its growth.

Kelowna was a fine base for a charter operator but it didn't really give us the scope, the potential we need as we're growing.

Swoop is entering an area of the airline business that doesn't have a stellar history of success in Canada: Jetsgo, Air Canada's Tango, Canada 3000 and Roots Air have all floundered in the past.

Canada is the only G7 country without a true ultra low-cost carrier (ULCC) and the model has been successful in Europe, Australia and the United States, said transportation analyst Chris Murray of AltaCorp Capital.

I don't think we've ever seen a true ULCC model in the Canadian marketplace before so I think we're in somewhat uncharted territory, he said.

I think there's also frankly some opportunities if they do it well to be successful with it.

Murray estimates the Canadian ultra low-cost market can handle 10 million passengers per year, enough to support up to 50 aircraft. The service is particularly suited to leisure flights to Las Vegas, Arizona and Florida, he added.

Swoop says fares should be 30 to 40 per cent lower than a national carrier.

The key will be to keep costs down from lower labour costs, cramming 189 seats into Boeing 737-800s, and stimulating demand from people who don't normally fly because of the high cost.

The carrier, however, has already had something of a bumpy takeoff.

WestJet's launch of Swoop had been a source of labour strife between the company and pilots, who were on the brink of a strike last month before reaching an 11th-hour deal.

Earlier this year, the union won a Canada Industrial Relations Board challenge to the company's proposed policy to offer pilots a two-year leave of absence if they go to fly for Swoop.

A federal arbitrator recently ruled that WestJet's unionized pilots will also fly Swoop, which means the airline can no longer outsource Swoop flying, a major disagreement in recent negotiations.

Swoop will recognize the union as the exclusive bargaining agent for all Swoop pilots, who will be on the airline's one seniority list and fly aircraft at Swoop terms and conditions.

Initial one-way flights start at $49 tax included from Abbotsford to Winnipeg, $129 between Hamilton and Abbotsford and $99 between Hamilton and Halifax.

The fares don't include a range of fees, including carry-on luggage and checked bags starting at $26.25, seat selection start at $5, and $15 to contact the call centre if the service can be carried out on the website.

No pets aside from guide dogs are allowed on board and any credits are only valid for 90 days. No loyalty points will be awarded.

Swoop is starting with two planes, with plans to roll out six by year-end and 10 in 2019.

Instead of flying from Toronto Pearson International, flights will fly out of Hamilton's lower-cost airport. Other initial cities are Winnipeg, Edmonton, Halifax and Abbotsford.

Additional destinations will be added, including international flights likely by the end of 2018, said Greenway. Flair plans to fly to Orlando and Palm Springs, Calif., next winter.

While there is a real concern that passengers could feel being nickled and dimed by a series of ancillary fees, experience in Europe over the past 20 years suggests passengers ultimately focus on the fares, said Greenway.

It is an education process and I think people will adapt over time.


Tourism Observer

CANADA: Air Transat In Court For Falsely Advertising Non-Stop Flights

A Vancouver law firm has launched a class action lawsuit against Air Transat (TS, Montréal Trudeau) for falsely advertising flights as non-stop in a scam known as the Mexican Game.

In winter 2016, Transat wet-leased Flair Airlines (F8, Kelowna) B737-400s to operate flights from Calgary, Edmonton Int’l, Kelowna and Vancouver Int’l to destinations in Mexico.

However, the charter operator did not disclose to either passengers or Mexican authorities that technical stops would be needed along the way, adding as much as three hours to a scheduled five-hour journey.

According to an e-mail quoted by CBC, Air Transat’s Operation Manager, Mauricio Diaz, instructed Flair Airlines to keep quiet about the flight plan.

Due to Mexican authorities restrictions, we always need to file a direct flight (plan) Cancun-Edmonton Int’l, the May 2016 e-mail read.

Never file Cancun-New Orleans Int’l-Edmonton Int’l because it will be refused by the Mexican authorities, the e-mail continues.

When the flight is airborne from Cancun, you can plan the technical stop in New Orleans and advise ATC air traffic control.

Flair’s Director of Flight Operations, Harold Knop, told his pilots that Transat has advised us that this method has worked successfully and without any issues with previous operators and that there was no negative passenger reaction in these situations.

Responding to a CBC request for comment, Air Transat said: It is important to clarify that we do not promote our flights as non-stop and, as you must know, direct flights may entail stops along the way.

RK Litigation is now launching a class action suit on behalf of disgruntled passengers.

In its suit, the law firm claims that Transat’s actions allowed them to sell tickets at an inflated price, and to use inferior aircraft with lower operational costs.

The Mexican Game allows Air Transat to utilize sub-standard aircraft otherwise incapable of executing the advertised itineraries, the law firm said in a press statement.



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