By Brent Jang | July 20, 2015 Estimated reading time 5 minutes, 48 seconds.
The entrance to Hamilton International Airport, where fledgling NewLeaf Travel Co. Inc. hopes to have one of its Canadian hubs. HIA Photo
NewLeaf Travel Co. Inc. has emerged as the third entrant in the race to start an ultra low-cost carrier (ULCC) in Canada, but all three would-be discount airline players face hurdles in raising enough money to launch.
NewLeaf president Jim Young, a former executive at Denver-based Frontier Airlines Inc., said his proposal focuses on using secondary airports in Canada.
One terminal on his shortlist is Hamilton International Airport, long seen by industry experts as an under-used site that is overshadowed by Toronto’s Pearson International Airport. Another facility in NewLeaf’s sights is Abbotsford International Airport, which has been seeking for years to raise its B.C. profile in a region dominated by Vancouver International Airport.
“Think of it this way. For a very long time, people didn’t think of Chicago Midway as anything more than a secondary airport, and now look at the size of it,” said Young, who is based in Ontario. “We’ve got cities in Canada that could support a primary and a secondary airport.”
In June, NewLeaf announced it would be locating its head office at Winnipeg’s Richardson International Airport.
Young isn’t alone in his general pursuit of budget-minded travellers in Canada. Vancouver-based Canada Jetlines Ltd. and Calgary-based Jet Naked also want to start operations as ULCCs.
Jetlines and Jet Naked have stumbled in their efforts to raise millions of dollars.
Jetlines remains far short of its target of attracting $50 million in funding. Jet Naked has lost three key executives in a messy case that has resulted in the former Jet Naked recruits suing for breach of contract.
The Edmonton-born Young, who worked in the first six months of 2014 as Jetlines president, is now pouring his energy into NewLeaf.
While he acknowledges that Air Canada and WestJet Airlines Ltd. are the dominant companies nationally, he is undaunted by the challenges of making inroads.
Flair Airlines will provide NewLeaf with planes and crew. Rob Sowald Photo
“We will create our own market, so we’re not really trying to steal market share from a particular airline. They have different customers, and we’re going after the ULCC marketplace that has essentially been shut out so far in the air travel market in Canada,” said Young.
Sandi Gilbert, co-founder of equity crowd-funding firm SeedUps Canada, said there could be sufficient pent-up consumer demand for lower airfares in Canada, but it won’t be easy for any ULCC to find ways to avoid the country’s two largest carriers.
“We have two main carriers in Canada that have some cash, and could put the crunch on anybody entering this space,” Gilbert cautioned. “Where are the investment dollars going to come from? It’s going to be very difficult to raise capital in the airline industry.”
SeedUps Canada has helped Jump On Flyaways raise money, though it has been small amounts. Jump On is a privately-owned firm that charters aircraft and tries to entice consumers to book deeply discounted fares. The catch is that if not enough passengers sign up, the flight is cancelled.
Gilbert said the three would-be ULCC players need to raise millions of dollars, and it is unclear how many of them, if any, will be successful. “Can Canadians support it? That has yet to be determined,” she said.
Despite the challenges, Young is optimistic that there is room for NewLeaf. He has lined up Kelowna-based Flair Airlines Ltd. to provide planes and crew.
“Airports want to attract new service, and to a certain extent when you think about, the business market is pretty well covered. That leaves the leisure market,” Young explained. “Consumers seek leisure opportunities, and you just have to make it affordable for them.”
NewLeaf will examine short-to-long haul flights, depending on what opportunities arise. Besides air transport, NewLeaf said in June it will provide holiday packages that will include flights, hotel rooms, car rentals and entertainment.
Earlier this year, the fledgling carrier hired Legacy Partners Wealth Strategies Inc. in an effort to raise money, but Young said that partnership ended and NewLeaf has other strategies to lure $25 million in funding.
Even though the ULCC proposals have remained on the drawing board, Air Canada and WestJet have taken notice. Air Canada recently introduced new routes such as Toronto-Abbotsford through its Rouge leisure operation, while WestJet will start Abbotsford-Las Vegas this October.
