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.


Tourism Observer

CANADA: Winnipeg Airport Passenger Traffic Up 4% For First Six Months Of 2015

Winnipeg Airport celebrated with a special cake the launch of Sunwing Airlines’ new winter seasonal service to Ixtapa in Mexico. The launch of services to Ixtapa has helped the Canadian airport achieve an average growth rate so far in 2015 of 4%, with 3.8 million passengers expected to be handled by the end of the year.

Winnipeg Airport celebrated with a special cake the launch of Sunwing Airlines’ new winter seasonal service to Ixtapa in Mexico. The launch of services to Ixtapa has helped the Canadian airport achieve an average growth rate so far in 2015 of 4%, with 3.8 million passengers expected to be handled by the end of the year.

Winnipeg is situated right in the heart of Canada and is the capital of Manitoba Province. The city is known for its strong mixed culture and numerous festivals, including the famous Festival du Voyageur, an annual 10-day winter festival that celebrates Canada’s fur-trading past and unique French heritage through entertainment, arts and crafts, music, exhibits and displays. One of anna.aero’s favourite sites in the city is The Forks, a historic meeting place in downtown Winnipeg that has a history dating back 6,000 years to the early Aboriginal people. Of course, the best way to get to Winnipeg and experience this history is to fly, and this summer you can reach Winnipeg from 22 non-stop destinations according to OAG Schedules Analyser data.

Passenger numbers up 4%
For the first half of 2015, passenger traffic out of Winnipeg has risen 4%, resulting in just over 74,000 additional passengers passing through the facility when compared with the same time period in 2014. Over the six months between January and June this year, the latter was the best performing so far, seeing an increase in passenger traffic of 5.3%. If the average rate of growth continues for the rest of this year at 4%, Winnipeg can expect to see just under 150,000 extra passengers travel through its facility, resulting in approximately 3.8 million people using the airport in 2015.

SVID says “Excellent”
Winnipeg recorded a SVID score of 0.70 (“Excellent”), placing the airport eighth out of the 50 plus airports that have been analysed so far this year. The result means that Winnipeg sits between Chennai and Belo Horizonte airports respectively. To gain a comparison within the Canadian market, two airports with similar passenger traffic figures to Winnipeg have also been analysed. Halifax Airport scored 3.36 (“Good”), while Ottawa Airport performed better than Winnipeg by scoring a very respectable 0.19 (“Excellent”), the best score recorded so far in 2015 by any airport.

Toronto Pearson remains top
Toronto Pearson remains the number one route from Winnipeg in relation to seat capacity, helped by the airport pair seeing an increase in seat availability of 7.6%. Of the remaining top 12 routes, only Calgary (3.7%), Montreal (9.3%), Saskatoon (0.1%) and Churchill (74.4%) showed growth. The route in the top 12 that has seen the biggest decrease in capacity is Ottawa, which is down -47.6%, meaning that Montreal now takes fifth spot when compared to the same time period last year when it was sixth. One major change to the top 12 is that Denver has fallen from 12th last year to 14th in S15, a result of capacity being shrunk on the sector by -28.3%. Two new airports that have entered the top 12 for S15 are Churchill and London (highlighted in light green), which have replaced Thunder Bay (-42%) and Denver.

Calm Air fastest growing airline
Calm Air (highlighted in light green) is the only airline in Winnipeg that is showing a growth in capacity when compared to the same time period of last year. The regional airline has grown capacity by 47.3%, allowing the carrier to become the third largest airline at the Manitoba airport, overtaking Delta Air Lines (-4.6%) and United Airlines (-42%). Both Air Canada and Westjet are reporting marginal declines in capacity when compared with S14, with the national carrier reporting a fall of -1.0%, while Canada’s largest LCC is reporting a drop of -1.1%. However both remain the top two carriers out of Winnipeg.