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

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.

"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.

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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."

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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."