Podcasts

#14 Affordability and the Future of Ultra Low-Cost Carriers in Canada

About This Episode

Join Chris Glass from Flight Aerospace in this special edition of “The Jump Seat,” recorded at Abbotsford Airport, as he explores the affordability and future of ultra low-cost carriers (ULCCs) in Canada. Chris is joined by a distinguished panel: Stephen Jones, CEO of Flair Airlines; David Gillen, Professor Emeritus at UBC; Parm Sidhu, GM of Abbotsford Airport; John Gradek, Professor at McGill University; and Andrew Gibbons, VP of External Affairs at WestJet.

The panel delves into the current state and growth potential of the ULCC market in Canada, highlighting how it lags behind more developed markets in Europe, the US, and Asia. They discuss the challenges and opportunities in making air travel more affordable for Canadians, the impact of regulatory frameworks, and the importance of a competitive aviation ecosystem. The conversation also addresses the risks and barriers faced by ULCCs, including regulatory hurdles and the need for industry reforms.

Tune in to gain insights into the future of affordable air travel in Canada and how ULCCs can reshape the aviation landscape by making it accessible to a broader population.

Podcast Transcript

Chris Glass: 

Hi and welcome to a special edition of the Jump Seat. My name is Chris Glass, I am a product owner with Flight Aerospace and I have a panel of guests today here to talk about affordability and making sure Canadians can travel across this country and to international destinations at a price everybody can afford. With me here at the iconic Abbotsford Airport, one of the only ultra low-cost airports in Canada. I am joined in the airport with Stephen Jones, president and CEO of Flair Airlines.

Stephen Jones: 

Nice to see you. Good to be here.

Chris Glass: 

Welcome David Gillen, Professor Emeritus at the Sauter School of Business at UBC.

David Gillen: 

Nice to be here.

Chris Glass: 

And Parm Sidhu from Abbotsford Airport the GM here at the airport Nice to be here. And Parm Sidhu from Abbotsford Airport, the GM here at the airport and online. I’m joined by John Gradek, professor at McGill University and vice president of WestJet Andy Gibbons for External Affairs. Welcome to the show, guys.

Andrew Gibbons: 

My pleasure Great to be here.

Chris Glass: 

So let’s dive right in. Stephen, my first question goes to you as the representative of the lone startup, now of ULCCs in Canada.

Stephen Jones: 

Where do you think the industry is and where do you think we need to go? I think, if you look at it in a global context, we’re still in the very early days of the development of the market here. I think that if you look in Europe, in the US, in Asia, the leisure market, which is served by the low-cost carriers, makes up anywhere between 30% and 50%. In Asia, parts 60-plus percent of the total market, and the balance is made typically by the national carriers and the global network carriers, and so Canada. I think we’re at about 9%. So if you think about it in that context, I think we’re in the early days of this at the moment.

Stephen Jones: 

If I think about the market 10 years from now, I think there are two things that are certain. I think the first one is that Air Canada is still going to be here. I think they’re a good airline, they do what they do and they really, you know, fulfil a need at that point. The other thing I think is certain is that the leisure market will be served by a big low-cost carrier and everything that’s in between, I think, is up for question and up for flux at the moment, and so I think that’s just the way that the aviation markets around the world have sort of bifurcated. So I think it’s just the way that the aviation markets around the world have sort of bifurcated.

Chris Glass: 

So I think it’s early days, early days. Professor Gillen, how big do you think, in your opinion, the ULCC market is in Canada, and how big is that leisure market that we’re talking about?

David Gillen: 

How big? In what sense Do you talk about numbers or percentage of market share? Percentage of market share? Well, what we see generally is the LCCs. New LCCs will grow to about 25 to 30 percent of the market and because of the way that they enter the market generally first is they’re grabbing people off the couch, they’re grabbing people from buses and railways, et cetera. Once you do that, you really do have to stimulate the market through fares. Once you move to the point where you’re starting to steal from the full-service network carriers, that’s when you’re going to get a competitive response and that’s what limits it to about 30%. And that’s certainly true in Europe, it’s true in Australia, new Zealand and it’s true in the US as well.

Chris Glass: 

Excellent, Professor Gradek, I’m going to throw to you. You’re fresh off your testimony at the House of Commons earlier on this week. What do you see? The industry struggles right now. Where do you see the industry in Canada yourself?

John Gradek: 

right now. Where do you see the industry in Canada yourself? Well, I think the industry has done a great job in trying to maintain its status in terms of being the remaining carriers being viable. I think we’ve seen the examples in recent months about a. You know about ULCCs and the typical demise of a ULCC in Canada. You know the ULCCs. You know as much as Stephen, you know, is promoting the ULCC concept through the FLIR model.

John Gradek: 

You know ULCCs have been around Canada for a long time. In fact, westjet is a ULCC, was a ULCC back in 1997. And we’ve seen Jets go as another example of ULCCs that you know have grown and have disappeared, and so it’s not as if ULCCs don’t exist or haven’t existed in Canada. The question has been or is, you know, is the operating regime that we have in Canada conducive to the ongoing success of ULCC operations? I think that you know the dichotomy that we have in Canada. I see WestJet and I see WestJet’s evolution from a Southwest ULCC branded model and the evolution of WestJet. But I also see a number of other ULCCs that have failed along the way for a variety of reasons, including financial strength and marketing strategies and, of course, the clout being exercised in the marketplace by the duopolies at the time, and so you know the issue of competition in Canada and the competitive nature of the business and the role that ULCCs play in competition in Canada has left a lot to be desired, and I think the story continues to play itself out today.

Chris Glass: 

Excellent. I’m glad you brought up the evolution that WestJet’s gone under, because that bodes into my next question. Andy, westjet’s been on both sides of this coin. They’ve been the scrappy upstart from the Southwest days of following that model to having a more complex product and being more of an established incumbent. Where do you see the industry right now?

Andrew Gibbons: 

Well, I think it’s a fascinating time for Canadian aviation, right? There’s a lot of people who talked a lot for a lot of years about you know there should be more carriers on the market. There are some domestic routes where six carriers were serving it last summer, whereas before the pandemic there were two. So you know, we’re seeing a lot of activity, a lot of coming and going, a lot of stops and starts. I think for us, chris, it really is about the transformation that we’re under in our growth strategy. So we’ve recognized publicly that many communities in Canada didn’t know what WestJet was. Are you a ULCC? Are you a low-cost carrier? Are you Air Canada Light? What is the modern WestJet? And I think under Alexis, in the last two years, those questions have been answered very, very clearly.

Andrew Gibbons: 

So our business plan and our growth strategy is around three pillars right, western leadership, national leisure leadership and getting back to our low-cost roots. And one point on the low-cost roots as it relates to the ULCC is, although Canadians liked Swoop, they flew Swoop, they embraced our product and there were no issues in terms of its viability. The determination we made was that that market segment can be best served within the WestJet brand and within our aircraft. So we haven’t left the ULCC market. We will be serving that market very, very aggressively in the way we’re reconfiguring our aircraft. So you will have three distinct cabins basically in all WestJet airplanes and I think that relates to the market in Canada.

Andrew Gibbons: 

There are restrictions on the market, geographic and otherwise. So if we can have a flight between Kelowna and Toronto that doesn’t require you to stimulate 180 seats but only requires you to stimulate 40, that’s a great fit for that community. That’s what that region can make a success and that we can succeed in. So I think some of our criticisms historically have been apt, but all of those have been addressed and more, and we’re in a good position right now. Excellent.

Chris Glass: 

So, talking about creating a competitive ecosystem, it’s something Parm and I have talked about on and off for the past couple of months. I know the Canadian government has made changes to foreign ownership rules. Professor Gillen, how has that affected the market? Changing the foreign ownership rules to allow 25% from outside of Canada capital coming in?

David Gillen: 

On the face of it, you would think that it should have changed it in a significant way. The reality is, I don’t think it’s changed it all that much, because there were some new restrictions introduced. In particular, the 25% was restricted not only for you kind of a singled entity, but also it now is anybody associated with providing aviation services in Canada or other parts of the world, and so that seems to me to be counterproductive, because what they’re saying is you can’t have people bringing expertise, not only capital, but you can have them bringing expertise, which is exactly what you want, and I think that that’s really a fundamental problem. And the other is because there’s both a de facto and a de jure test. The de facto test is whether it’s Canadian, so that is going to be something that is going to be taken before the Canada Transportation Agency.

David Gillen: 

And, let’s put it this way, I would feel uncomfortable going against the US Supreme Court if I were complaining about Donald Trump right now and if I were complaining similarly about some of these changes that were taking place going before the CTA. They will get into the minutiae in such a way that things could go either way, open to interpretation, that things could go either way with open to interpretation, absolutely, and I think because of that, you’re creating a lot of risk, which no businesses like risk a lot of uncertainty, and so, even though there have been changes in the foreign ownership rules, the amount of uncertainty has really not changed at all, and that is going to affect the willingness on the part of investors outside of Canada. And I think the final point I’ll make is in the recent budget, because of the change in capital gains, aviation is a risky business and so what they’ve done is they’ve made it less attractive to undertake risks because the returns are not going to be granted post-tax.

Chris Glass: 

Right, when you talk about it being a risky business. I’ll throw to you, stephen, what are some of the risks that potentially the traveling public doesn’t see? What are the fees that the average Canadian doesn’t know about? What are we up against here as an industry?

Stephen Jones: 

Well, the risks are manifold. There are risks all through the business. There’s operational risk, there’s commercial risk, regulatory risk. It’s a risky business, there’s no doubt, and so that’s why investors in aviation expect a larger than normal return, and sometimes they get it, but most often they don’t. I think if you look at the sum of all of the profits of our industry since commercial aviation was first started, it’s a negative number.

Stephen Jones: 

And that’s without accounting for the cost of capital, probably, and the asset intensity of it. So at a structural level it’s kind of a crappy industry. So the risks I mean if you think about what we’ve been through, you know COVID is the most obvious one. We’ve been through record high oil prices. They come and go. I’ve lived through SARS, I’ve lived through, you know, bird flus, and it’s in geopolitical changes that influence demand. They also influence fuel prices. So there’s a ton of risk in it.

Stephen Jones: 

The operational risk, obviously you know we run a very safe industry, but it’s a consequence of a great regulatory structure that looks after that. So the other changes are just sort of risks, the risks of what the other players in the game are doing. You can control your own capacity and control your own brand and pricing, but you can’t control what others do and sometimes you find that the motivations of people in the industry are different to what you’d see in other industries. It’s an industry full of ego, an industry full of national pride or personal pride that gets in the way of sometimes otherwise rational commercial decisions.

Chris Glass: 

Andy, would you agree with that assessment as one of the competitors in the space?

Andrew Gibbons: 

I mean, there’s a lot there in terms of assessing risk in the market. You know, it’s not really about what WestJet thinks about it. I’m always struck, chris, by the comments of people who run airlines like Southwest and Frontier and JetBlue. They’re very clear about this. The reason they don’t fly in and out of our airports is because they consider the market expensive, regulatory overreach and low margin, and they conserve the market from US border airports like Bellingham. So you know, I recognize that we’re one of the big carriers, but it’s the voices of those other organizations, those other companies who are very successful airlines globally, who make a deliberate choice not to invest in Canada. So I think their assessment of risk is the most compelling argument here, rather than ours.

Andrew Gibbons: 

I mean, our observations are pretty straightforward. We think the regulatory regime governing commercial aviation is out of step with a modern Canada. It is air that connects, that is the connective tissue of this nation, and we have a regulatory tax environment that is reflective of an era when a train from Montreal to Moncton was somehow essential to the nation, and that’s not the case anymore. It is the work that airlines are doing to connect the nation. So I think we just need a big modernization. We need to take a good look at user pay, and we’ll talk about all this at committee tomorrow and John talked about it yesterday.

Andrew Gibbons: 

But I think there’s a lot of potential to unlock and it’s not a mystery there are 7 million Canadians that take US border airport flights. They don’t have better aircraft than Flair and WestJet have. They don’t have better flight crews, they don’t have better safety. They don’t have none of that. The only reason they exist is because of the regulatory regime that creates that advantage for which they capitalize on, and good for them. We’d probably do it too, but we could actually quantify how much passengers we should repatriate into our system, and we should probably stop gifting the American industry 7 million passengers a year, and maybe one day we can reverse that trend. I know that’s music to farm’s ears here, but you know why couldn’t, why can’t it be that way? Why can’t we be the takers versus the situation today? So a big question on risk. But I think all the experts that testified yesterday all basically touched on the same base. We have regulations and policies that really don’t reflect the modern nature and importance of our sector, that really don’t reflect the modern nature and importance of our sector.

Chris Glass: 

Now, John, I’m going to throw to you when we talk about those regulations, because I know you were talking about it earlier on at the House of Commons. What are some of those regulations that put barriers on airlines that may not?

John Gradek: 

exist for other industries. Oh, you know. I think that you know. The question is what’s the Canadian consumer? In the eyes of the Canadian consumer, it is much more expensive to travel on a Canadian carrier on a Canadian airport than it is, for a similar distance, for that Canadian consumer to use a US airport. And pure and simple, you know it’s all about cash. And how much is it going to cost you out of pocket to fly from point A to point B, either using a US point or using a Canadian point?

John Gradek: 

You know there is an avoidance of that conversation at the federal level that you know. They said you know, if it ain’t broke, why fix it? Why touch it? And right now they don’t seem to recognize that it’s broken. They seem to think that the status quo is acceptable, that the status quo, yeah, it means that we’re all playing on the same level playing field, which is true. You know we don’t have a competitive advantage one over the other based on regulations being applied differently. But, yeah, just because it’s applied evenly doesn’t mean it’s conducive to improved financial performance and improved market share. The loss of share, as Andy said, of what Canadians are experiencing, what Canada is experiencing is not acceptable.

John Gradek: 

Transportation is an unalienable human right. In Canada, this country today would not exist without air. We can’t get in, we can’t. There’s no other mode of transportation. How are you going to get from Ottawa to Calgary? How are you going to get? You can’t do it any other way unless you want to take a three-day train ride or drive across the country. We need air. Air is an integral part of our supply chain, as I said yesterday, and we need to make sure we’ve got an operating structure, a regulatory structure that makes us competitive. And right now I just have to look, you know, 60 kilometers south, to kind of just say wait a second. There is a gap, there’s a problem that we have and it needs to be addressed.

Chris Glass: 

So talking about it from a regulatory point of view, but airports also play a role in that. So, parm, I’d like to throw it back to you to talk about an airport’s role in the cost of travel and affordability and wondering what Abbotsford is doing here, that maybe some airports aren’t, and what you’d like to see across the nation.

Parm Sidhu: 

Yeah, at the end of the day, chris, you’ve seen one airport, you’ve seen one. We’re a platform for business. The business is WestJet, the business is Flair. We give them a very competitive platform to grow and the passenger volume at Abbotsford showcase. There is demand for low-cost fares, double-digit fares that stimulate.

Parm Sidhu: 

We need to be a connected country. The country’s too big and that we get to see loved ones, get to see this great nation. But the viable, growing airlines will grow your airport. You know it’s the airline that drives the growth, not the airport. But in our case we have a competitive platform and we’ve been stimulating passenger growth since 97. From 97 to 2003, we moved the needle fast to half a million. Then again from 2015 to 2023 the needle moved. It was stimulation of passengers, in that Canadians have the appetite and the willingness, want to travel, but they need a competitive ecosystem Within the airline, at the airport and off airport. Low fares do no good if the hotel accommodation is 500 a night. So there’s a lot we can do to keep Canada connected. Canada should be leading the globe in aviation, aerospace development, growth and IP.

Chris Glass: 

Excellent, Professor Gillen. What changes would you like to see made for a more competitive landscape?

David Gillen: 

Andy made a very good point earlier when he said in the United States the costs are lower and the fares are lower, and I think that that’s an important aspect, because there’s two steps there. One is to get the costs down. Things like getting rid of airport rents. The fuel taxes that are levied by the federal government and by the provincial governments make no sense whatsoever, but those costs are only going to be translated into lower fares if there is a more competitive industry Absolutely clear and the security charges, for example, in the work that I’ve done has shown that CATS is nothing more than a profit center for the federal government.

David Gillen: 

There’s absolutely no reason for that whatsoever. So those are all the costs that do have to come down, but they also have to create a structure that allows more competition to take place, and that is certainly going to involve stop treating Air Canada like a sacred cow, because that has a huge influence on the way that policy is put in place and part of the user pay philosophy is based on the notion that there’s a single business model in the country.

Chris Glass: 

Yeah, now, john, you wanted to jump in there, so I’ll give you an opportunity to add your two cents to that you wanted to jump in there, so I’ll give you an opportunity to add your two cents to that.

John Gradek: 

Me Two cents. I don’t know, man, I don’t know if I have an opinion, but yeah, it is something that’s dear to my heart in terms of getting an audience that can listen, that can understand and can do something about it. And I think that you know, I’ve been trying over the years to get you know politicians to kind of pay attention to the fact that you know, yeah, the system is broken. As much as people don’t want to say it, the system is broken and so we need to basically fix it. We need to fix it across a number of modes. In Canada, you know, and you know whether it’s the fee structure that’s in place and how we and how CAATSA does its thing.

John Gradek: 

I think there’s there’s a need for governance in governance, in terms of making sure that whatever we’re paying, whoever is paying for the bill and it’s ultimately the consumer that’s paying the bill that we’re getting value for money.

John Gradek: 

And right now, from a regulatory perspective, from a financial perspective, from an operating perspective, from a governance perspective, we’re not getting value for money Right now.

John Gradek: 

I got airports across the country, whether it’s Trudeau Airport, spending $4.5 billion on parking or on road access, or Toronto Pearson with their lift program, spending I don’t know how many billions of dollars on improving infrastructure infrastructure. They’re not really doing anything that addresses the needs of the consumer in terms of looking at building an airport, building an infrastructure that really meets the needs of what tomorrow’s or today’s traveler needs out of those airports, and the process of how do you spend that money and what do you spend it on and who watches over and how do you put together KPIs and performance criteria that says you’re doing a better job spending dollars here rather than there. That whole process isn’t working and I think we’ve. We’ve, as Andy said, you know we’ve left this thing laissez-faire for years and on the hope that somehow, some way, we’re going to have some proper diligence in how we spend it. Unfortunately, that diligence isn’t working and governance has fallen between the cracks.

Stephen Jones: 

Well, I think David made the point that I was going to make, that I think that this is an expensive country to operate in, so the cost structure is high, but that doesn’t alone explain why airfares are $800 to fly for an hour and a half. You know that’s the competition layer on the top that actually will drive it down, because, you know, maybe the difference between the cheapest airport and the most expensive airport could be $60 a passenger. $70 a passenger you know there are airports in this country it’s $70 a passenger when you push off the gate. But that doesn’t explain the difference between $150 of fares and $800 of fares. You know that’s competition, and so I think David made the point cleanly before.

Chris Glass: 

Excellent, Andy. Do you have anything to add to that? Yeah, I think there’s a few areas.

Andrew Gibbons: 

You know when we joke it’s not a joke. But in 1996, when we founded, we didn’t sit around and wait for a fax from Ottawa. You know this is how you should treat your guests. This is how you should invest in communities. We took on the biggest competitor in the country and we’re the only one who’s come to scale and successfully done that. So our standing on these types of issues is sort of unrivaled in Canada.

Andrew Gibbons: 

So I’d just point out a few areas for your listeners. One would be do no harm, and I think the example here on our desk today is APPR. Every single regional airline, regional airport, big airline, big airport, chamber of commerce, you name it. If you fly Canadians or you rely on air travel, you’ve advised the government that you don’t want a European 261 model in Canada, that it doesn’t work, that it’s punitive, and the expression we use, chris, is performance, not penalties. Two, we should stop the overpay. Caatsa was mentioned by the professor and there’s two Professor Gs, professor Gillen. But you know, canadian travellers, that money should be held in trust, that should not be.

Andrew Gibbons: 

There should not be a siphon out of the bottom to general revenues, and I’m not criticizing CAATS as management or anything like that. I’m just observing that that is a fee paid by the traveler, should be held in trust and it should be directly correlated to the services provided. I think number three is and John Gradek touched on this is a performance culture. We need more performance reports tabled in parliament by federal agencies. We need value for money audits, we need all of those things that put the traveler first, and if everyone levels up on performance including WestJet, by the way we’re not some perfect entity If everyone levels up on performance, that’s the ultimate thing that will sort of lift all boats.

Andrew Gibbons: 

Five would be the culture of user first in governance and public accountability, and we can’t help but compare airport authorities to port authorities in Canada.

Andrew Gibbons: 

It’s not that airports are not managed by good people devoted to the country, but there is a discrepancy in how we make the user principle the most paramount principle of governance and the discrepancy between those shared public assets and the ones we operate in. So we think there’s improvements that can be made there and I don’t think those are really controversial. And then we need to tackle this concept of land border versus air border. We run an efficient land border in Canada with performance standards and for clear metrics, at the expense of the air industry. The air industry borders are generally an afterthought that’s a very harsh statement, but it’s not governed and it doesn’t have the performance culture of our land border. So our land border is considered some sacred economic corridor, whereas air borders are, you know, best efforts, right, and so I think we can just all level up and apply pressure, and if we put the traveler first and sort of ignore where these ideas come from, I think that’s what the traveler wants, quite frankly, and that’s really what should govern us.

Chris Glass: 

So I have two ways to take this based on what I’m hearing here, but a question for both Andy and Stephen. I’ll let you answer it first. More so, for our listeners’ sake and playing devil’s advocate, why not just raise fares? Why not raise fares to a certain level of profitability, fill the planes at that price and have Canadians just share a bigger burden? If the costs are that high, why not just raise base fares?

Stephen Jones: 

Well, we’ve got the fortune of being with two academics here today and I think, even if you go back to high school economics, there’s this thing that goes supply and demand, and the point where they cross is called price, and when you put the price up, demand falls and we see it every day.

Stephen Jones: 

Our revenue management is super, super dynamic and if we could put the prices up a dollar, we probably would, but our load factors would fall. And so what you know, in this way people say, oh, the fuel price has gone up, just put your prices up to cover it. It doesn’t work that way. In the short term, revenue is disconnected from cost. In the longer term, cost plays out through capacity decisions and things like that. But in the short term, every flight we optimise for the maximum revenue. We aim for a load factor. So we utilize a strategy we call load factor active, yield passive. So we target to fill the flight to 90% on average across the year and then we sell a lot of ancillary products on top of that. So if we raise our prices, our base ticket fees, our load factor drops unless demand has changed. So it’s that basic economics 101 or high school even. That gives you the answer to the question.

Chris Glass: 

So there is a breaking point of too high.

Stephen Jones: 

It’s all the time, Like you know, every time you put the prices up, someone else sits on the couch instead of going traveling.

Chris Glass: 

Right, and Andy, you would agree with that.

Andrew Gibbons: 

Yeah, I think so. I mean, yeah, I mean, those are the principles behind pricing, chris, it’s less about. I think that’s been the instinctive answer in Canada and that’s the problem. Well, just raise base fares. It’s just $2. It’s just $3. Appr is only going to be $6 a person. Big deal. Well, stephen just told you, if he raises it by a buck, sometimes he sees a difference in activity.

Andrew Gibbons: 

So we have to be vigilant and you know, call it a club sandwich of fees, if you will. You know, yes, we may not be able to reduce all of the layers, but we can take out the lettuce, we can take out the tomato, we can do something here. But doing nothing is not the answer for the country. And I think the government and I don’t just mean the liberal government of today, I mean government generally has an obligation, right Like.

Andrew Gibbons: 

I just don’t think it’s fair that the Canadian traveler, stephen’s guest, our guest, overpays, pays for all of their infrastructure, all of their services, and overpays only for the government to prioritize and another mode of transport for which there are options, for which there are options and in the communities where Stephen is investing, or WestJet or any carrier, even often in these communities it is air that connects it. It airs the connective tissue. So, chris, I just I know I think for too long in Canada it’s sort of been the instinct it’s just a couple of bucks, it’s just this, it’s just that. And maybe 25 years ago or 30 years ago, before WestJet, that might have been okay when 18% of Canadians flew. But we have to make sure air travel is democratized. That is like a sacred thing for our country and we can all argue about who’s doing it better or worse and all that stuff, but that’s a pretty sacred obligation for all of us.

Stephen Jones: 

I couldn’t agree more, and I think you turned the question the other way around. If you could take the price down five bucks, how many more Canadians would actually get access to travel? And that’s the challenge for the industry.

Chris Glass: 

Right. I think, john, you hit the nail on the head earlier on when you were talking about transportation and travel being a fundamental right, as opposed to a lot of other things where you could just raise the fees. You know, if you raise the fees on a movie, people might not go see a movie, but travel is not something that should be optional, it should be a fundamental right. So can you speak about that and what the right of travel means to people?

John Gradek: 

Well, I think that you know you have to be careful when we talk about the sensitivity of Canadian travelers to the pricing that my colleagues are talking about. I think that you know, if I, if I, you know, turned the clock back to summer of 23 and I look at, you know, markets that flare we’re operating in and markets that you know that their former competitor were operating in and that WestJet was, you know, competing either directly or through swoop. Westjet was, you know, competing either directly or through swoop. It really was. You know it was the best of times for Canadian travelers. As far as the Canadian travelers concerned, because you know we were getting fares that were, you know, dirt, dirt cheap. We were basically getting one way fares between Toronto and Calgary at 99 bucks in the middle of the peak. And so you know today, you know the services are still there, but you know the fare now is somewhere around $230, $240.

John Gradek: 

So the Canadian consumer is saying wait a second. What happened to wait a second? What happened to competition and what happened to the price level that I got last summer? Why am I paying such a higher level of price summer of 24? And so to your point about price sensitivity and what’s the? What should the fair be that makes economic sense for everybody in the marketplace? I think that the debate is going to be starting yesterday. Started yesterday to a certain degree, but is $99 too low? Yes, is $230 too high? I don’t know, you guys know better than I do. But the Canadian consumer is asking himself the question what should a fair price be? And we’ve gone through the extremes of summer 23 pricing versus summer 24 pricing and the Canadian consumer is confused. And the Canadian consumer is saying wait a second, there’s price gouging taking place here. We’re paying too much, no, no, we’re paying too much for airfares.

Andrew Gibbons: 

The page hasn’t barely even been opened on the summer, and you’re talking about.

John Gradek: 

But we’re all selling it. We’re all selling it, we’re all selling it.

Stephen Jones: 

Right, Right yeah.

John Gradek: 

Yeah, so you know. Are Steve’s planes full for the summer? Nope. Are your planes full for the summer? Nope. Is there going to be some further pricing action?

Andrew Gibbons: 

Are great fares available.

David Gillen: 

Yes.

Stephen Jones: 

Our planes will be full for the summer, don’t you worry about that. No, they will be full for the summer, don’t you worry about that? No, they will be full. And I think you can’t really compare to summer 23. I think it was a bit of an aberration and, as a consequence, the consolidation needed to happen and it ultimately has. I think your better comparative is probably back to what I’d call the bad old days of duopoly maybe 2017 or 16, when everyone was making good money, fewer people were flying, but the prices were well higher than they will be this summer. So I think we’ve got actually some healthy tension in the market at the moment. It’s making everyone better, but last year was a bit of an aberration.

John Gradek: 

I think, but it happened. It happened Steve.

Stephen Jones: 

It did, and Lynx is gone.

John Gradek: 

So what are the expectations from the Canadian consumer? The Canadian consumer is saying, well, my only basis for comparison is last year, and so now I’m saying where are last year’s prices? And yeah, they’re not there anymore, because the airlines now are being more rational in terms of making sure they’re putting fairs in place that have some semblance of profitability, and I think that that’s where we have work to do with the Canadian consumer in terms of what should Canadian consumers expect in terms of price levels in the longer term and what should that behavior look like in terms of how competitors should be acting in and around that price level?

Stephen Jones: 

So I don’t understand why you say that their only reference point is last year. It’s not like they’re all one-year-olds. People have a memory of the bad old days. Stephen, we all have a very short memory.

John Gradek: 

You know this is. You know people have a memory of the bad old days. You know, stephen, we all have a very short memory. You know that we all have short memories.

Stephen Jones: 

Well, I can guarantee you we’ll be 90 plus percent full right through the summer.

John Gradek: 

Don’t ask me to go back to 2017. You know, they’re saying what did I pay last year? And so what happened in 2024? And I think that, yeah, you can say it’s an aberration, but it was a real fact. You pay tickets on your airline to fly across the country for under $100. And they’re saying where did that go? How did that happen? Well, we say well, you know, competition’s changed in Canada, the competitive landscape’s changed and we now are in a situation where prices have gone up. Can I address?

Andrew Gibbons: 

that Well, I just think, John. We poll our guests, we talk to our guests. The number one issue for our guests is affordability. It’s no different than Abacus or Nanos polling on the political. So we have to be charged with that and be responsive to that, or we’re dead.

Andrew Gibbons: 

And we love our guests and want to give them value and great product, but it’s also true we have to be responsive to that. So you know, I think we’re ready to be judged on that. But I mean, I combed through our fairs last night in advance of this in the committee presentation, and I was like, wow, those are some. I mean, I’m biased, prejudiced, okay, but for me, I was looking at it, going, wow, these are some incredible prices we’re seeing. Of course, if you want to fly Ottawa to Calgary tomorrow one way yeah, it’s not going to be a nice price, you see on the app but if you want to go peak summer, you can get there for $230 one way and people will judge whether that’s reasonable or not. But there are great fairs in the market. I mean really great fairs.

Andrew Gibbons: 

But we have to be responsive to the affordability crisis. We can’t be stagnant, lazy, complacent companies or, you know, canadians are going to vote with their wallets and vote with their feet, to vote with their wallets and vote with their feet. So I mean, I just let’s come back after summer and get out the report card. On the issue of the battle days Stephen talks about, you know many communities I visit where they say, man, in 2017 and 2018, the chart of growth at every Canadian airport was like this double digit growth everywhere in the land between 2010 and 2018. So I mean, I just bad old days for who. You know, every country and every community in the nation was seeing record investment, and I think that record investment and growth actually allows our politicians to say you know what, I’m going to take a pass on those issues because the growth was incredible. So anyway, stephen, you know I had to address that, but I don’t know who those were bad old days for.

Chris Glass: 

I’m going to kick it over to Parm.

Parm Sidhu: 

Yeah, so the demand for ultra low-cost fares is significant. Right, they’re like a dollar. A ULCC is like a dollar store. If you take out a dollar store, not everyone can shop up market. So if we want to keep Canada competitive and stimulatory and have ultra low cost carriers, they need an ecosystem. And the double digit fare is still what stimulates significant amount of travel around the world and Mr Jones can probably talk to that more. But the $49 to $79 fare I monitor fares in the US and here that $49 to $79 fare is still available today in May. I checked last night as well.

Parm Sidhu: 

One-way fares on shorter block time flights Out of Abbotsford when Flair charges $49 or WestJet charges $49, our fees are about $4 a passenger. That’s leaving a fair base chunk for Flair and WestJet and you take an ancillary. That one-hour block time flight can be done, in our opinion for a double-digit fare. But the appetite for the consumer to have value and have a product out there and stimulation, the demand is there. But the question really comes down to can they get a supporting ecosystem and can the airlines make that viable? If we don’t have growing, profitable airlines, we have unused assets in airports. We should be like highway one. They should be open for business and their public assets and Abbotsford in particular, that we want airlines and viability of airlines and we just sit back and do. What we need to do is our core business as an ultra low cost airport is runways, taxiways and giving the airlines a costco warehouse type of an operation where the airlines are empowered, enabled to entice consumers excellent uh, professor gillen, it’s uh, I wanted to come back to you.

Chris Glass: 

Um, this is kind of the million dollar question. What is the right amount of capacity for canada? You know, and I know that’s a very loaded question and a lot of people would disagree on what that number is. But how many? How many airlines and how much capacity can Canada support? How much stimulation can there be done by ULCCs?

David Gillen: 

Well, in terms of numbers of carriers, depending on. Well, if you have access to the US market which I think is critical for both the ULCCs as well as the full-service carriers and if you have some international travel and that certainly gives the full-service carriers a competitive advantage I see no reason why you can’t probably have another couple of ultra-low-cost carriers in the country, as long as they’re able to work within the Canadian market and the US market. But that’s going to depend on a number of factors, and John has brought it up, and others have as as well, that what can Canadians expect? And what we don’t know is what to expect, and largely because we have no information. Right, if there is anything, that there is zero transparency in the aviation sector, general transportation sector, and you could take this across all government departments, but particularly in transportation In the United States there’s much more transparency and I think the consequence of that is that the lack of information and access to information means that it’s a barrier to entry and airlines like Flair, when they want to enter markets, they need to know what that market is going to look like, and you’re not going to get that in Canada. I can’t. I don’t know how many passengers fly from Toronto to Vancouver. I know how many passengers fly out of Vancouver and fly out of Toronto is, and I can’t get it even back to 2005, because it’s a sacred question that StatsCan has managed to get its hands into.

David Gillen: 

The second part of it is that we talk about kind of what the consumers are going to get. Those are direct benefits and what we’re missing here is the affordability is going to be connected to kind of after-tax disposable income and that is going to be a consequence of what’s happening in the economy, and airlines and airports are a key factor in that economic growth and in the growth of productivity. If you look at the United States, some work I’ve done there has shown that the connectivity of aviation in the United States is worth about $208 billion, so it’s dramatic. So that connectivity is really an indirect benefit that is generating economic value, from which then people can generate incomes, which is going to allow them to be taking trips, either for leisure trips or for business trips. So I think you can’t ignore the fact that there are all of these not only direct benefits, but these indirect benefits from what aviation is providing and it really is an enabler, and that’s what I think where it’s. As john said, it’s fundamentally broken now.

Chris Glass: 

Ottawa just does not understand that that enabling facility of aviation has to be nurtured right, and it seems like there’s an understanding of that in almost every other industry except for aviation. You know, there’s understanding that we need trucking, we need all of that for an economy to be viable, but air travel it just seems like it’s added on and added on and added on and added on.

David Gillen: 

No, that’s exactly right. I mean, not only is we don’t just have user pay, we have user profit in aviation. We’re a cash cow. There is no user pay in rail, there is no user pay in public transit, there is no user pay in marine and there’s no user pay in trucking or in automobile travel. Aviation is the only one who is not only having user pay but is added on to that to make it, as I said, a cash cow for the federal government.

Chris Glass: 

And the average consumer has no idea this is taking place.

David Gillen: 

No, unfortunately.

Chris Glass: 

So I guess what can the average consumer do? What can somebody who wants to see a more competitive landscape? What’s the next step for a consumer to get involved? And that’s for anybody on the panel line that’s open-ended Anybody on the panel line that’s open-ended Vote.

John Gradek: 

Vote. Make sure you and it’s really, it’s the federal government, it’s really the politicians, it’s really, you know, lighting a fire under our politicians to basically recognize, as Professor Gitlin said, you know, the economic value that air transportation provides this country and to express it, express it numerically, in a way that people can understand and get the politicians to have a conversation around the economic benefit that air transportation can provide this country. Because you know the politicians aren’t paying attention. In my opinion, they’re not. There is no basis for them to do that. There’s no, nobody’s lit the fire under them to do this and, you know, does it?

John Gradek: 

Will it take a crisis in aviation for somebody to start to say wait a second, we have a problem here and let’s understand the value, the economic value, of air transportation? And you know, I think we’re beyond that point now We’ve got to somehow some way restart the conversation or start the conversation, and I think you know conversations like we’re having today. You know, hopefully we can replicate that in a number of different venues Conversations that my friends Mr Gibbons and Mr Jones will be having tomorrow along with Parmer In Ottawa. You know that’s going to be part of the conversations that we should be having to wake politicians up and say wait a second, it is broken, let’s do something about it. Let’s not stick your head in the sand and hope it goes away, because it’s not going to go away, it’s going to get worse and let’s have a debate.

Stephen Jones: 

And what I’d add to that is let’s think about who’s really most impacted. And when Lynx went away, did any of you stop flying Any less? Did you fly any less? When Lynx went away, did any of you stop flying Any less? Did you fly any less when Lynx disappeared? Anyone? John? You’ve probably still got Air Canada flight benefits, do you? Wouldn’t impact you at all, but anyway, the point is that the people that are flying on Flair, they skew younger and older, so people that have less money, less disposable income, they skew new Canadian, and so these are the people that are going to be most impacted by the lack of affordability of travel. It’s not the middle class aeroplane members, it’s the lower socioeconomic or people that affordability really bites. You know that they make that choice that are being impacted.

John Gradek: 

It’s my. As Stephen said, it’s my students.

Stephen Jones: 

It is your students.

John Gradek: 

yeah, If Flair and Westchurch’s buckets aren’t there. You know, my students can’t fly. That’s not a good thing.

Stephen Jones: 

That’s right, interesting academically, you know, in the structure of the industry. But if it’s gone, it’s the students, not the profs or the executives, that are impacted.

Parm Sidhu: 

And Parm. Yeah, if you looked at the 2023 data for Abbotsford Airport 1.275 million passengers. We were turning into the Vegas of Canada. Our parking lot would fill up Thursday, would empty up Monday. They were flying Transcon to Toronto, ontario or to Alberta for a weekend and working remotely. But it was stimulation and they showed you. The demand was there and, to Mr Jones’s point, it was everyday average Canadians witha low household income, first-time flowers, loved ones, grandmas, going back and seeing the kids multiple times. But it was stimulation that was favorable to an affordable value in parking $9 a day. It was just an ecosystem that showcased it can work.

Chris Glass: 

Right, john, something you touched on. I want to ask you directly do you feel we’re at a crisis in aviation in Canada?

John Gradek: 

Oh, I think so. I think that you know it’s like the yellow frog that you put in the boiling water. You know frogs sting in cold water and then you raise the temperature up. Frog doesn’t know it’s getting cooked. I think that the same thing is happening in Canadian aviation, that you know we’re on a slow boil and we’re seeing, you know, car wreck after car, wreck after car wreck I don’t want to use the word plane wreck and we’re seeing car wreck after car, wreck after car wreck I don’t want to use the word plane wreck but we’re seeing wreck after wreck after wreck along the way and we’re in a situation where we’re saying, so what Same old, same old. And I think that, unfortunately, we’re going to wake up one day and we’re going to be in a situation where we’re going to say, oops, we missed the boat here. We’re going to be segmented, our competitive nature will change completely, we’ll ostracize our economic sectors that depend on that, would love to have transportation. So yeah, I think we are, but we haven’t recognized it.

Andrew Gibbons: 

I think there’s a discrepancy between the Ottawa conversation about aviation and what’s happening in communities in Canada around aviation. You know, alexis and I just spent a couple of days in Edmonton last week and you know our fundamental premise under this new strategy is that the West has been underserved. So, john, you know we put up a chart that showed Edmonton compared to similar sized cities in the United States and these are no slouch cities Oklahoma City, milwaukee, louisville these are good sized cities with a good mix of travelers and a good business and government mix, and Edmonton has more markets served and more available seats than all of them, than any hub city in the United States. Yet there’s this perception that you know canes are suffering or there’s a crisis. You know we have a trade mission to Atlanta this week to celebrate our new flight. So I just you know we have a trade mission to Atlanta this week to celebrate our new flight. So I just you know. I do believe actually there’s a discrepancy between the media and the commentariat’s view about aviation and what’s actually happening.

Stephen Jones: 

And you know there’s a lot of enthusiasm for what we’re doing.

Andrew Gibbons: 

We are criticized a lot and that’s our station and we’re going to take it and we’re going to punch back and do what we have to do. But at the same time, there’s also incredible enthusiasm, for you know, I even call it a Renaissance in Western Canada. If you look at Winnipeg, edmonton, regina, saskatoon and all of these markets and what’s happening there, it’s pretty, it’s pretty incredible. And so I mean I think there’s a bit of a confidence crisis. And my last point would be, chris, to your point, what should people do? And I put that obligation back on us. We have to run our. We have to run a reliable, affordable, stable operation consistently for canadians, and canadians have to believe that what we’re doing is in the national interest.

Andrew Gibbons: 

And we’ve been stuck in the muck and mire the last little while over consumer issues and you know we’ve got media going on Twitter saying, hey, did you have a bad WestJet flight? Please call us. You know just nothing has been going our way on this score and I think when we get back to that stable, reliability and Canadians do respect our companies, they do care what we say. So there is this discrepancy between everything is wrong, committee discussion with I’m sure Stephen is going to list all the communities that have embraced him and his investments and they’re enthusiastic about it. But we don’t get CBC headlines about that. We get CBC headlines about the one in a hundred thing that went wrong, not the 99 in a hundred amazing things and memories and experiences that people had.

Andrew Gibbons: 

So, anyway, the obligation’s on us. We can’t sit around and say woe is us. But you know that has to. I think once that once we get past that, this hump of consumer angst and APPR and backlog and all these things, I think that we can have a different environment. That’s on us too, yeah.

John Gradek: 

No, and I’ll just jump in here just for a second. I’m one of the guys you know on the commentary side, but it really is. You know the commentary, really. You know, I’m very, very pleased to see WestJet’s efforts in Western Canada. I think Western Canada is very well served by WestJet. It has done a great job of positioning itself as the carrier of choice, the carrier of the future in Western Canada, which is great. But it’s the rest of Canada, I think it’s the Maritimes, it’s Quebec, but it’s the rest of Canada, I think you know it’s the Maritimes, it’s Quebec, it’s Ontario, you know, it’s the rest of the country that seems to have, you know, not benefited from the initiatives that you guys are doing in Western Canada Again, great. But you know there are other communities in Eastern Canada and I know you guys did the Halifax thing and it’s great stuff.

Andrew Gibbons: 

We could devote a whole podcast to our maritime strategy.

Andrew Gibbons: 

But again, I think, john, I think you’re, you know to be fair, like Alexis is in Halifax and St John’s this week Incredibly well-received, and like we can’t be all things to all people and I think the communities where we invest get that. So the mix of flights looks different out there. We’re not all things to all people anymore, but they actually get that. So back to the discrepancy between what’s actually happening in St John’s and how they actually are viewing our investments versus what the Ottawa commentariat is. I know you’re not an Ottawa, so that wasn’t for you, but there is a gap.

John Gradek: 

That is an observation and we have an obligation to make that clear. That’s fair. That’s very fair. I’ll take the shot. I’ll take the shot, no problem, okay.

Chris Glass: 

So one thing that I think is not the solution, but I get from all my friends and family and anybody who’s not closely following the industry and I think I’ll pose this question to Professor Gillen why not just open it up and let American companies come in? And you know they have so much success down south of the border. Why not allow them to come into Canada and fly within our borders?

David Gillen: 

Oh, so currently, under the Canada-US aviation arrangement, you can join any two points in the two countries, which is a fair amount of freedom. What we don’t have is cabotage, and they’re starting within the US or flying holding within Canada. I think you want to be a little bit careful before you allow that. First of all, there should be reciprocity between the two countries, and if there was reciprocity then I think it may possibly stimulate traffic and competition between major cities. You have to remember, 94% of the traffic in Canada moves within, I think, eight or nine airports, and then, even with that 94%, there’s even a smaller percentage that works between Vancouver, calgary, edmonton, not even Winnipeg, but Toronto and to some extent, montreal. So you’ve got a very limited number and you’re in a long, narrow country. And in the United States it’s 360 all the time and you’ve got what? 340 million people, so it’s the largest aviation market in the world. So I think you have to be a little bit careful. But those airlines are not going to come to Canada as long as the costs are as high as they are in terms of using airport services and airport facilities.

David Gillen: 

I would, for example, be in favor of having rights of establishment the way that Australia does, and not necessarily that airline is going to enter the Canadian market, but at least the opportunity is there, right?

David Gillen: 

If a firm believes that they have a better product and are going to offer the levels of services within the sets of rules that everybody else has to follow, then that’s fair enough, right. And a point that Canadians, we are a land of oligopolies, you know, we have essentially two airlines, two railways, three grocery chains, three telecom providers, and there is this psychology among Canadians is that, well, that’s just the way it is. Because we’re a small country, et cetera, and we don’t have to be a small country, because we’re a small country, et cetera, and we don’t have to be a small country. If we would at least allow freer trade between provinces, as well as greater trade between Canada and foreign countries, then we can necessarily grow that market but provide the opportunity for firms to compete if they want to compete, and if they don’t want to compete, that’s fair enough. But if you create barriers to entry, then you’re not going to have that opportunity at all.

Chris Glass: 

Stephen, with your company being the, I guess, newest competitor, do you feel like there’s a great barrier to compete coming in?

Stephen Jones: 

Not really. I think. You know, foreign investment is certainly one of the things. Under the government’s 2018 policy they opened it up a little bit. Flir attracted more investment from outside of Canada. Canadian investment capital is relatively risk-averse and so it enabled some you know capital with higher risk tolerance to come in. The same thing with Lynx. And then it’s a matter of just getting started. I mean, airlines are incredibly cash consuming and so there’s a big barrier to entry. Just in starting an airline anywhere, you know you’ve got to sure you can lease your aircraft and all of that. But just the startup costs. Building markets it takes a lot, and so you know it’s not for the faint of heart. You know it’s easy to sit there with PowerPoint and Excel and make a good plan and get some marketing done, but actually getting going is hard work. It’s a really tough game.

Chris Glass: 

Difficult Parm. As a representative from the airports, what would you like to see moving forward to make it more competitive? I guess you probably don’t want to give away your secret sauce, but what would you like to see other airports do that Abbotsford’s done well or that you think would help stimulate that traffic?

Parm Sidhu: 

Yeah, our secret sauce or public asset is just enable the airlines. Enable them with a competitive platform and the business will grow through the airlines because they’re the ones that out there sell you something. We’re like the highway we just happen to land planes. I think right in front of us right now is a great opportunity with the growth at WestJet and Flare and Porter and Transat and Air Canada. We have enough capacity. The key is can we keep these carriers going and keep Canada year-round, make domestic travel more year-round, give Canadians the Sun destination holidays they want? But I believe the volumes are there if all these carriers can continue to grow and see the viability of profitability and competitive platforms.

Chris Glass: 

So providing that vessel as opposed to a profit center.

Parm Sidhu: 

Yeah, our success is measured through Flare and WestJet success. We make that very open and they’ve got a platform, one of the most competitive probably in North America.

Stephen Jones: 

Yeah, I mean, palm’s secret sauce is no secret. It’s a great product at a reasonable price, right, you know, it’s fantastic.

Chris Glass: 

Yeah, it’s not market science, Andy. What would you like to see airports do differently?

Andrew Gibbons: 

Oh, I told myself I’d avoid airports on this podcast. Look, I think like Palm deserves a lot of credit for his Canadian leadership and the whole city of Abbotsford Like you know this is a lot of people told him how crazy they were and how delusional they were, and the number speaks for themselves.

Andrew Gibbons: 

And of course, you know, of course we have an incredible history and incredible history there. We consider Parham an honorary West Cheddar, you know, and we have some competition there now and that’s going to play itself out the way it should. But you know he deserves really like we’re talking about national leadership on these issues. So you know, just full credit to Parm and Parm. Thank you for getting this group together today. It’s not a usual coffee clatch on a Wednesday, so good on you.

Andrew Gibbons: 

Look, airports, you know. I think, again, when you compare the governance and public accountability of Canada’s airports versus other shared public assets, I think it’s there. I think there’s obvious gaps to be filled there and again, that’s not a direct shot at our competitors, but I think improvements and enhancements can be made for the traveler. I was struck, you know we’re celebrating 10 years in Dublin, ireland, later this month and the first time I went to Dublin 10 years ago, the airport authority took us out for lunch and said can you sign this letter for us? So what’s this letter? Well, we need you to support this expansion.

Andrew Gibbons: 

We’re thinking of letter. Well, we need you to support this expansion we’re thinking of and we need your letter for the regulator and for the government, because the government watches very carefully what we spend and what we don’t spend and how it relates to ticket prices and demand and Ireland being an island and so on and so on. And we were kind of going, well, this is something new for us and you know, and I think the culture in other Western countries is just a little bit different, and you know, there was a place for this governance model when the challenges were what they were.

Andrew Gibbons: 

But I think, like everything, you know, it probably needs an updating and a refresh and a modernization and you know I’ll probably leave it at that. But you know they also don’t get a fair deal from the government. You know, when we support them on rent, that’s not okay that the government puts that money into general revenues. We think that should be reinvested. I think we support them on that and the modernization of our borders. Airports are leading on that to full credit, right, whether that’s making sure CBSA is upping their game or making sure that USCBP is running well. Like you know, they are fronting a lot of that conversation and you know, let’s face it, we need to modernize our borders in Canada. Let’s be real, like this is not where it should be for a G7 modern nation, and so I think they have a major role to play there.

Chris Glass: 

Excellent, Stephen. Same question for you about airports. What would you like to see from airports going forward?

Stephen Jones: 

It’s really simple around cost control. You know the fees that we see coming through and just the. You know the increases that come through without any consultation or thought of the impact and it’s just like, yeah, there it is. It’s 15%, it’s 20% up. It’s just like a disconnect from the impact that has on passenger demand ultimately because, as I think was pointed out before, the customers ultimately bear it. So we don’t need monuments to municipal ego, we just need really efficient, modern airports that do a good job at a decent price, like we’ve got here.

David Gillen: 

Right.

Chris Glass: 

Excellent, Professor Gillen, I’ll throw the same question to you. What would you like to see airports not necessarily change, but do business like in the future?

David Gillen: 

I think Stephen’s point is that there has to be accountability Right, and you can either get accountability through regulation or through competition Right, and I would much rather see competition. And so, for example, I would like to see airports be sitting at the table when international bilaterals are negotiated, because the airports are the ones providing the infrastructure and not just the airlines providing the services. So I think it’s a business relationship and that would introduce more competition. I think the second thing that, at least within the Canadian model, we have a not-for-profit airport sector, but on the other hand, because of the restrictions being put in place by the government, we have all sorts of additional fees, and part of those is the consequence of ground rents but the improvement fees for the airports. So I couldn’t imagine, if I go to my General Motors dealer that they’re going to say by the way, we’re going to ask you for an extra $2,000 because we’re thinking of developing a new product in the future and we want you to pay it forward.

David Gillen: 

The capital markets don’t work that way in the private sector, so why should they work that way in the airport sector? And you’re only going to get that with some amount of privatization, and there are clearly some other issues around privatization, but it has to be more broadly based to increase more competition within the airport sector, because we went through the regulation in the past and that has proven to be a massive cost and a non-starter. I would never want to see airports being run by Transport Canada again. We saw what we get for that and what we have right now, and I think Abbotsford is a great example of what I think. It was a very competitive airport where there is transparency and it’s providing the kind of services that you need within a supply chain.

Chris Glass: 

This has been such a fascinating discussion for me to hear all the different points of view and to see there’s so much agreement around the table. Like I know, westjet and Flair are strong competitors, but it seems like there’s a lot of agreement on where to move forward. So I think that’s going to be something important as the industry moves forward is to be speaking with one voice on the things we agree with, instead of fighting all the time about the stuff we disagree with.

Stephen Jones: 

Yeah, and I think we agree that competition is actually good for customers. You know, it forces us both to be better and the result of that is a better product for customers and better service for customers.

Chris Glass: 

And the competition can’t just be with airlines, it needs to be with airports.

Stephen Jones: 

It’s the whole system. The competition can’t just be with airlines.

Chris Glass: 

It needs to be. With airports, it’s the whole system Right. You know, one of the things that really struck me during COVID when we reduced airport fees, they stopped airport rents for a very short period of time. Nav Canada doubled their fee or raised their fee significantly, and it seemed to be so out of step with what the market needed at the time. So speaking with one voice is important for us to stop things from that happening in the future and making sure that this remains a country of affordable air travel for everybody. I know that’s something as an aviation nerd and a professional for the last 24 years. It’s something that’s near and dear to my heart is making sure Canadians are able to travel for whatever reasons they’re traveling for. Andy, I know in WestJet’s history, connecting people and freeing everybody up from the high cost of air travel was always a mission that the airline started out with. Can you talk a little bit about what it means to communities to be able to access the ability to travel?

Andrew Gibbons: 

Yeah, I mean, that’s not a part of our history, chris, it’s a part of our future and I think you’re hearing a lot and, more importantly, seeing a lot from us that you know we really are dedicated to going back to our roots in many respects and you know the company that you to going back to our roots in many respects and you know the company that you served and so proudly for so long. I think you know that ambition for Canada is something that’s really coming to life again in our organization and not being all things to all people and being very, very laser focused on our strengths and serving the market. So you know, I think that’s coming out In terms of communities. Communities are waking up on air service in Canada. I’ll tell you that Our team has done roundtables every corner of the country.

Andrew Gibbons: 

The expression we use is federally regulated but provincially critical. Every premier, every provincial tourism and transport minister wants to understand more about our business. How do we get your investment? What are the keys to unlocking that route? How do we get connected to your global hub? How do we get more Las Vegas? Whatever the community is and the wants and needs are disparate, but at the core, I think, coming out of COVID. There’s great things as a result of COVID.

Andrew Gibbons: 

I don’t mean that. What I mean is communities are really engaged with our company in a way that didn’t exist before, and I think we’re really working hard to bring the flights that communities want, not the ones we’ve designed on a spreadsheet, and you know like it can be both. So if you look at Regina and Saskatoon, it’s a perfect example. Right, we have daily flights to Minneapolis, starting right this week, and that is the biggest air service gap that the province had, and that’s one that American carriers did not believe were viable. So the response has been incredible. So I’m sometimes surprised, chris, because you know we’ll go to Saskatoon, regina, we’ll have an incredible roundtable, hundreds of people at our event, the mayor and everyone under the sun tweeting about how great all of this is, and then you get to a parliamentary committee in Ottawa and it’s not the same conversation or the same energy we’ll just put it that way and that’s something we just have to continue work on.

Andrew Gibbons: 

But I would say the discrepancy is real between Ottawa and the communities and it means everything. And when communities can’t be part of you know, we’ve had to say goodbye to some communities good WestJet communities and that was really hard. But you know Canada needs a profitable WestJet. If we don’t establish that, I mean forget it. That is that’s ground zero for us. Canada needs that. Forget our shareholder and forget anyone else. The country needs that. So I hope you see that, I hope your listeners see that in what we’re doing, because that is something we’re, you know, something we’re really keen on. Because why would we screw around with what made us so successful? That’s what Canadians, that’s the company Canadians fell in love with. That’s what they expect and appreciate. So why would we discard that for some other path? So you know, I think the ship is righted.

Chris Glass: 

Excellent and, stephen, I think I had the ability to spend some time with your team at the Edmonton airport and to see the commitment from your employees to make sure that people could fly. It was really embedded in your organization and it was really something I picked up on from everybody who was talking to everybody. It was about freeing up people to travel. I think we could agree that we need a viable flair in Canada as well, so if you could give me your take on that, yeah, absolutely.

Stephen Jones: 

I think all great companies have a purpose that’s greater than just you know making money next quarter, you know. So, walt Disney, you know making dreams come true, right Ritz-Carlton. Ladies and gentlemen serving, ladies and gentlemen, well, our purpose is really clear and palpable amongst the team. We want Canadians to have access to affordable travel, because it makes lives better and richer, and so that’s what binds us and that’s what I think will be a core to our success as well.

Chris Glass: 

Excellent and, as we’re wrapping up today’s podcast, I’d like to thank our guests for coming on it and being open to this discussion. I know getting some of the personalities in the room and getting some of the different perspectives can be a challenge, but I think we really helped move the conversation a little bit forward today. I think we really helped move the conversation a little bit forward today. Parm, I’d like to thank you especially for putting this on and, parm, I’d like to give you the last word on today’s jump seat. So take it away. My friend.

Parm Sidhu: 

Hey, the brand is always Canada and I think we have amazing product here and I think we can lead the world and movement of people and goods within domestic Canada and give our Canadians where they want to go, internationally and onwards and upwards. And thank you, westjet Flair, for partnering with us at Abbotsford and you’re enabled.

Chris Glass: 

Excellent, and thank you everybody for joining us in another edition of the Jump Seat. I’d like to thank Flight Aerospace for putting on this production and keeping this conversation going. I look forward to many more conversations. Perhaps after the summer we can have that conversation about whether this was one to remember or one where our fares were too high. I look forward to that and I appreciate the time everybody spent with me today.

Stephen Jones: 

Thanks, thanks, andy, thanks very much.

David Gillen: 

Yeah, Okay excellent, Chris.

Andrew Gibbons: 

thank you very much.

Recent Podcasts

Jun 4, 2024

#15 From Flight Ops to EFBs: Brian Gleason’s Aviation Journey

Listen Now
May 21, 2024

#14 Affordability and the Future of Ultra Low-Cost Carriers in Canada

Listen Now
May 13, 2024

#13 Dive Into Blockchain and AI’s Impact on Industries with Lorne Sugarman on The Jump Seat!

Listen Now