Saskatchewan government subsidizes WestJet Minneapolis flight

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Saskatchewan government subsidizes WestJet Minneapolis flight
WestJet will be offering flights from Saskatoon to Minneapolis in June after some support from the provincial government was ensured. Gates Guarin has more. – Feb 18, 2023

WestJet will be offering flights from Saskatoon to Minneapolis in June after some support from the provincial government was ensured.

“We’re committed to fostering a competitive business environment in our province, and that’s why the government of Saskatchewan is happy to support this flight with a minimum revenue guarantee of up to $2.2 million,” said Jeremy Harrison, Saskatchewan’s minister of trade and export development.

Harrison said the provincial government is prepared to backstop to make sure the flight continues going forward.

“I would really characterize it as an insurance policy. This is going to ensure that WestJet is able to operate this route in an efficient way with certainty that there is going to be an economic return on that as well.”

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The flights will begin on June 19, running three times a week through a partnership with Delta Airlines.

Harrison said Minneapolis is an important hub, noting that it will increase connectivity between the United States and Saskatchewan.

He noted that there was no announcement to be made out of Regina, but added that they’ve been working with the airport authority.

Jason Childs, associate professor of economics with the University of Regina, agreed that this will create greater connectivity, but pointed out some concerns with the minimum revenue guarantee.

He said a minimum revenue guarantee is an agreement where if a business doesn’t meet a specified minimum revenue, then someone will come in and fill in the rest to make sure that specified revenue is met.

Childs added he would like to see the contract between the government and WestJet, noting more information is needed.

“What’s really happening is the government is taking on the risk of this route,” Childs said.

He said he is wary of these kinds of deals, noting that governments shouldn’t be taking on risks for private businesses.

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“I’m really not a big fan of these types of arrangements. I’m really not a fan of government assuming risk for private business, I think it’s a bad deal, and a bad model.”

Childs noted that these deals might get businesses to do things they might otherwise hesitate to do.

He said these kinds of arrangements are becoming more and more common around Canada and the world.

“One of the reasons why the market is so efficient is because it disciplines firms. If you do something that isn’t what consumers want, you lose money and you have a real incentive to change what you’re doing really quickly.”

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Saskatchewan government provides $2.85M subsidy to ambulance operators

Childs said this agreement with the provincial government completely undermines that market discipline.

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“You’re going to lose, potentially, some of the efficiency that we associate with markets by undermining the market process.”

Childs likened the situation to WestJet selling the tickets to the government of Saskatchewan, and the government trying to sell those tickets to consumers.

He said that taxpayers are on the hook in this deal.

“The government of Saskatchewan is acting as an insurance provider for WestJet on this route, and again, I really don’t think that’s a precedent this government wants to set. I really don’t think it’s good policy,” Childs said.

Andrew Gibbons, vice-president of government relations and regulatory affairs with WestJet, said they’ll be increasing capacity on other flights as well.

“We will be increasing connectivity between Saskatoon and Calgary,” Gibbons said.

“Calgary is WestJet’s hub, and WestJet is how the world will now connect to Saskatchewan.”

When asked about fare increases for WestJet flights out of Saskatoon, he said there will be a diverse range of fares.

“I was looking this morning on the app, and the inaugural flight on June 19, the lowest fare one way was $192. I think the average domestic airfare in Saskatchewan, I’ll have to check this, has been pretty flat for a couple of decades.”

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CJ Dushinski with Skyxe said this route used to exist before the pandemic, adding that it was quite successful.

“It was a very critical route for a lot of business connections,” Dushinski said.

She said it was important for hunting, fishing and tourism as well.

Saskatoon and the province started seeing fewer options for flights early in the year after Air Canada announced that it would be cancelling some flights out of Regina and Saskatoon, adding that it would be focusing on the main hubs of Vancouver, Toronto and Montreal.

Flair Airlines is set to start offering flights in May between Saskatoon and Calgary to try and fill the void left by Air Canada.

The Saskatoon Greater Chamber of Commerce also asked the Competition Bureau Canada to look into the cancellations in mid-January, suggesting there was a collaboration between WestJet and Air Canada to soften competition between the two.


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