NewLeaf Travel, the upstart airline that plans to offer service between seven Canadian cities at sharply lower prices compared to what Air Canada and WestJet charge for similar flights, can expect a “dogfight” with the bigger airlines, experts say.
And that’s a good thing for travellers, who should benefit from the added competition once NewLeaf begins flying next month.
“Regardless of NewLeaf’s long-term success, a new entrant into the market will at the very least mess with the incumbents’ pricing power,” airline analysts at financial services firm Raymond James said Thursday, a day after the Winnipeg company announced launch plans.
Starting Feb. 12, NewLeaf will provide flights at deeply discounted prices to Halifax, Hamilton, Winnipeg, Regina, Saskatoon, Kelowna and Abbostford, B.C. One-way tickets will range from $89 for shorter flights to $149 for longer trips.
The startup carrier’s business plan is based on the “ultra-low cost” model that’s been highly successful in the United States and Europe. Base fares will be for bare-bones service — basically the seat — with multiple add-on costs offered on everything from seat selection, baggage, printed boarding pass, and more, experts say.
The new airline will use a fleet of four Boeing 737-400s, configured with 158 economy seats — planes that are being provided by a third-party, Flair Airlines, an established charter carrier based in Kelowna.
That’s what experts know about the little-known airline, as well as the fact that it’s run by Jim Young, a former exec of Frontier, a successful discount airline south of the border. What’s not known is the whether NewLeaf can remain a thorn in the side of Air Canada and WestJet, giving Canadian travellers another, cheaper option to get around the country.
Experts suggest the current economic environment isn’t an ideal one to launch a new airline.
“The economy is much weaker, which invariably crimps demand for travel — to the unemployed it doesn’t matter how low fares are,” Raymond James analysts said.
WATCH: Breakdown of NewLeaf airlines additional costs
Both Air Canada and WestJet are also expanding their own regional services, a process that’s already lowering airfares for travellers as the two compete with one another.
“The market is now awash in excess supply,” Raymond James’ Ben Cherniavsky said. “As a result, fares in Canada have come under considerable pressure, making the case for an ultra-low fare entrant much less compelling than it used to be.”
Air Canada and WestJet are sure to respond to NewLeaf’s arrival, meaning the airline faces months, at least, of financial pressure as it establishes itself.
NewLeaf “must have a well-capitalized balance sheet to withstand the competitive response that its pricing strategy will surely elicit,” Cherniavsky said.
David Tyerman, another airline analyst at Canaccord Genuity mirrored the sentiment. “We are unclear whether whether NewLeaf has the financial resources to withstand a dogfight with Air Canada and WestJet,” Tyerman said.
Requests for comment from NewLeaf weren’t responded to.