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O Canada: Smaller Canadian carriers see chance to seize US market share amid pandemic shake-up

July 21, 2021
5 min read
O Canada: Smaller Canadian carriers see chance to seize US market share amid pandemic shake-up
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The Canadian border will reopen to vaccinated American travelers on Aug. 9 for the first time since the start of the COVID-19 pandemic.

“With rising vaccination rates and fewer cases in Canada, we can begin to safely ease border measures,” Canada’s Minister of Health Patty Hajdu said in a statement.

The U.S. border, meanwhile, remains largely closed to visitors.

The partial reopening creates some of the first good news for Canada’s struggling airline industry in more than two years.

As the border closed last spring and Canadian air traffic plummeted — falling to as few as 2,768 daily passengers at the country's eight biggest airports in 2020, down from normal daily volumes of 160,000 to 180,000 in 2019 — the Canadian airline industry was thrown into disarray.

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Even with a recovery underway and vaccination increasing in Canada, air passenger numbers have remained low. Each day in July has seen passenger counts at the eight major airports between 36,000 and 56,000, while in 2019 between 170,000 and 190,000 passengers could be expected on a normal day.

But in the eyes of two Canadian airlines, the near-collapse of air travel has created a new opportunity to grab a share of the lucrative Canada-U.S. air market.

Porter Airlines, a Canadian boutique carrier, plans to restart travel on Sept. 8 after almost 18 months on the ground due to the pandemic. Nine days later, the airline will resume service to destinations in the U.S., including Boston, Chicago, New York and Washington, D.C.

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"While deciding to suspend our service was the most difficult business decision we’ve made, announcing a restart of flights is the first step in a recovery process that includes recalling hundreds of team members and welcoming back passengers," CEO Michael Deluce said in a statement.

The carrier sees a unique opportunity to expand beyond its pre-pandemic network, which it operated with a fleet of 29 DeHavilland Dash 8-400 turboprop aircraft.

Last week, Porter announced it had placed a firm order for 30 Embraer E195-E2 aircraft. Porter will be the North American launch customer for the E2, the new generation of the Brazilian planemaker's successful regional jet. The airline has an option for 50 more jets.

The order, which will double Porter's fleet, will allow the airline to expand throughout the U.S., and potentially even to Mexico and the Caribbean. The first delivery is scheduled for the second half of 2022.

"This is a defining moment in Porter's history," Deluce said in a statement announcing the order. "Today we lay the foundation for a new and further reaching service for our customers."

While Porter and Embraer did not reveal pricing, Deluce suggested that, like United Airlines with Boeing and Airbus, Porter was able to secure a favorable deal with Embraer as a result of the pandemic's effect on the new aircraft market.

"The pandemic created opportunities on acquisition that were not available before," Deluce told Reuters in an interview. "We were looking at various growth plans, but I think the specifics really emerged during the pandemic."

Another small Canadian carrier, meanwhile, also sees an opportunity to grow as Canadian air travel returns.

More: Business travel is surging back sooner than expected, but there’s still some bad news for airlines

Flair Airlines, an ultra low-cost carrier based in Edmonton, Alberta, announced plans earlier this month to launch its own cross-border service into the United States.

Flair plans to begin U.S. flights on Oct. 31 with service to six cities: Fort Lauderdale (FLL), Orlando Sanford (SFB), Phoenix-Mesa (AZA), Hollywood Burbank (BUR), Palm Springs, California (PSP), and Las Vegas (LAS).

Although the airline is primarily targeting Canadian passengers looking to escape to warm weather destinations during winter, the airline will also be able to capitalize on American travelers venturing north.

The airline believes now, with the market in a state of relative flux, is an ideal time to launch the U.S. expansion, CEO Stephen Jones told TPG in an interview.

"We do think that there is a great opportunity," Jones said. "As demand comes back, we expect that the price-sensitive leisure segment will be the strongest and earliest to return, and that's really our core target market."

Jones previously led European ultra low-cost carrier Wizz Air.

However, this won't be Flair's first effort to fly south of the border.

Flair tried to launch a U.S. gambit before under different leadership, but was unable to make money on the flights. It suspended many of the routes with short notice in early 2019.

But Jones thinks that this time will be different.

"We certainly took some lessons from the previous efforts of the company," he said. "But this isn't rocket science. It's about flying people where they want to go. There's an incredible demand. It's all about execution."

More: Delta will add 36 aircraft to fleet as it takes a different tack from United

The airline plans to compete strictly on price, undercutting established Air Canada and U.S. carriers.

With the border announcement, meanwhile, the legacy carriers are eager to reclaim the market they've held in the past.

Both United Airlines and Air Canada — which are both Star Alliance members — announced increased U.S.-Canada flights coinciding with the reopening.

So while Porter and Flair see an opportunity, the market will not be an easy one. Or as Deluce told Reuters: "It certainly will be highly competitive."

Featured image by A Porter Airlines Q400 Turboprop; Toronto skyline in view. (Image via Porter Airlines)
Editorial disclaimer: Opinions expressed here are the author’s alone, not those of any bank, credit card issuer, airline or hotel chain, and have not been reviewed, approved or otherwise endorsed by any of these entities.

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Card Rating is based on the opinion of TPG‘s editors and is not influenced by the card issuer.
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Why We Chose It

If you are looking to take your premium rewards to the highest level, this card is really a no brainer in our eyes. Chase's Ultimate Rewards make points easy to redeem, with a wide range of 10 airline and three hotel transfer partners and a friendly user interface. Despite the high annual fee, Chase is consistently adding new benefits to keep the card competitive in a fierce premium rewards field.

Pros

  • $300 annual travel credit as reimbursement for travel purchases charged to your card each account anniversary year
  • Access to Chase Ultimate Rewards hotel and airline travel partners
  • Unlimited 3x points on the broad category of travel and dining
  • 50% more value when you redeem your points for travel through Chase Ultimate Rewards®
  • Broad definitions for travel and dining bonus categories

Cons

  • Steep $550 annual fee
  • May not make sense for people that don't travel frequently
  • You must spend the $300 travel credit before earning 3x points for travel and dining
  • No automatic hotel elite status
  • Earn 80,000 bonus points after you spend $4,000 on purchases in the first 3 months from account opening. That's $1,200 toward travel when you redeem through Chase Ultimate Rewards®
  • $300 Annual Travel Credit as reimbursement for travel purchases charged to your card each account anniversary year.
  • Earn 5x total points on flights and 10x total points on hotels and car rentals when you purchase travel through Chase Ultimate Rewards® immediately after the first $300 is spent on travel purchases annually. Earn 3x points on other travel and dining & 1 point per $1 spent on all other purchases
  • Get 50% more value when you redeem your points for travel through Chase Ultimate Rewards®. For example, 80,000 points are worth $1,200 toward travel
  • 1:1 point transfer to leading airline and hotel loyalty programs
  • Access to 1,300+ airport lounges worldwide after an easy, one-time enrollment in Priority Pass™ Select and up to $100 application fee credit every four years for Global Entry, NEXUS, or TSA PreCheck®
  • Count on Trip Cancellation/Interruption Insurance, Auto Rental Collision Damage Waiver, Lost Luggage Insurance and more