From small, family-run airlines to the nationwide reach of the Air Canada Express network, you’d be hard-pressed to find a more dynamic and competitive aviation sector than Canada’s regional airline industry.
All but three of the carriers on Transport Canada’s list of 50 scheduled passenger airlines (Air Canada, WestJet and Air Transat) can be considered regional airlines, if judged by the routes and the aircraft they fly.
The Air Canada Express network (Chorus’s Jazz, Sky Regional, Air Georgian and Exploits Valley Air Services) is the domestic and trans-border network served by a fleet that is expected to reach 159 aircraft by mid-2013.
The balance of the domestic routes are flown by approximately 35 private airlines, six carriers owned by publically-listed companies, and 10 airlines partially or fully owned by northern First Nations communities.
BY THE NUMBERS
Operating statistics for the regional airline sector are scarce, since only a handful of Canadian carriers regularly publish operating results.
In 2011, Statistics Canada reported that 58.5 million passengers flew on scheduled services operated by a total of 102 Canadian airlines (all carriers with annual revenues exceeding $2 million). About 42 million of these passengers (72 per cent) flew on the three largest scheduled airlines, with an estimated 16.5 million (28 per cent) flying on regional airlines (of which Air Canada Express flies about 10 million passengers).
With 16.5 million passengers, the Canadian regional market is about 10 per cent of the size of the U.S. market, where regional airlines flew 160.7 million passengers in 2011, according to data published by the Regional Airline Association (RAA).
An increasing number of regional aircraft are touching down at Canadian airports. Between May 2002 and May 2012, domestic departures increased by 50 per cent and trans-border departures by 33 per cent, while monthly domestic seats increased by 61 per cent and trans-border seats by 72 per cent, according to a Bombardier study of Official Airline Guide schedules for 30-to-99-seat aircraft.
The 50 scheduled regional airlines identified in the Transport Canada 2011 annual report owned a total of 925 aircraft in March 2013, according to the civil aircraft register. Of these, about 625 aircraft were flown on scheduled passenger and combi (passenger/cargo) flights, and another 300 were used to fly charters, air cargo, fire patrols, aerial surveys, medevacs, or for pilot training.
Canada’s oldest scheduled regional airline route is probably between Vancouver and Victoria, B.C., which received Boeing 204 flying boat service in the late 1920s.
In the mid-1980s, airline deregulation prompted Air Canada and Canadian Airlines to expand their code sharing agreements, and equity investments in second- and third-tier airlines.
The merger of the two national airlines in 2000 eliminated airline competition in many smaller communities. Air Canada’s network focus on high-yield travellers resulted in some passengers returning to the highway, while others flew on independent regional airlines serving niche markets.
Economic activity is the greatest driver of air traffic growth, so it’s not surprising that Alberta, and other provinces with strong natural resource economies, are seeing an increase in local and connecting regional airline passengers.
WINDS OF CHANGE
Very soon, Canada’s second-largest airline will enter the regional airline business for the first time since it made its inaugural Boeing 737 flight back in February 1996.
Encore, WestJet’s new regional airline subsidiary, is launching scheduled service on June 24 with the first of up to 45 new 78-seat Bombardier Q400 turboprops on firm order (20) and option (25).
“We are about to see a major boxing match between Air Canada Express and WestJet Encore,” observed Brent Gateman, president of Integra Air of Lethbridge, Alta. “For the first 18 months, the two airlines are going to be dancing around each other; but then Encore will have enough Q400s to punch a hole in Air Canada’s market share.”
The coming “Q400 War” between Encore and Air Canada Express is expected to stimulate passenger traffic with more frequencies, more seats and lower fares.
Expanding Q400 services may have a negative impact on the profitability of some independent carriers, but as 70-seat turboprops become the new service benchmark, the market may expand for third-tier airlines flying 19-to-50-seat aircraft.
AIR CANADA EXPRESS
Jazz Air Ltd. (now part of Chorus Aviation) was created through the integration of AirBC, Air Nova, Air Ontario and Canadian Regional Airlines Ltd., into a single Halifax-based company in 2002.
Photo: Flyvertosset, Air Canada Express Dash 8-100 at YYJ.
Paralleling changes in the U.S. airline industry, a Capacity Purchase Agreement (CPA) became the foundation of the business relationship between Air Canada and Jazz, after the two airlines emerged from CCAA (Companies’ Creditors Arrangement Act) protection in September 2004.
Air Canada is entitled to all Jazz revenues (except bar and buy-on-board sales) and is responsible for all scheduling, marketing and pricing of flights under the CPA. It pays Jazz for flying, crewing and maintaining the aircraft, with a markup applied. Volatile costs, such as fuel, are a pass-through expense from Jazz to Air Canada.
Photo: Andrew H. Cline, Air Canada’s fleet of 15 Embraer ERJ-175 aircraft is being transferred from the mainline fleet to Sky Regional Airlines between March and August of 2013, in order to reduce operating costs.
Any new regional flying since 2011 has been put out to competitive bid, expanding Air Canada’s supplier base.
On May 1, 2011, the Air Canada Express brand launched to coincide with the startup of CPA flying by Sky Regional Airlines between Billy Bishop Toronto City Airport and Montreal’s Trudeau Airport. The route is served with five 70-seat Q400s acquired from Lynx Aviation in Denver, Colo.
Then, on June 7, 2011, Jazz launched its Q400 services in eastern Canada with its first 15 74-seat Bombardier Q400s, which replaced 50-seat Bombardier CRJ100 regional jets on a one-for-one basis.
Bombardier says the cash operating costs of a Q400 are about 16 per cent more than a 50-seat CRJ100/200, but the 74-seat high speed turboprop provides 45 per cent more revenue seats, which reduces total seat mile costs.
In response to WestJet’s growth strategy, Jazz exercised options for six additional Q400s to expand service in Western Canada. Initial routes served include Calgary-Fort McMurray; Calgary-Regina; Calgary-Saskatoon; Vancouver-Fort St. John; and Vancouver–Prince George. As the six Q400s entered service, nine Jazz CRJ100s were retired.
The Air Canada Pilots Association (ACPA) agreement with Air Canada contains “scope” provisions that control the growth of Air Canada Express by setting limits on the size of the regional fleet, maximum aircraft seat capacity (74 seats), and linking Air Canada Express capacity growth to growth in Air Canada’s available seat miles (ASMs).
Air Canada Express plans to operate 159 aircraft under CPA agreements with four carriers by the end of 2013, an increase of 13 aircraft from 2012. This reflects the recent transfer of 15 Embraer 175 jets from mainline Air Canada service to Sky Regional, a unit of Skyservice Business Aviation, to lower operating costs.
The transfer, once complete, will see Sky Regional flying 20 aircraft under a CPA contract – 15 E-175s and five Q400s.
Jazz serves 56 destinations in Canada and 27 destinations in the United States, with about 39.4 per cent of its passengers connecting to Air Canada in 2011. Jazz will fly 122 aircraft for Air Canada Express in 2013, in addition to flying two Dash 8-100s, two Dash 8-300s, and one CRJ200 used for its charter business.
Chorus Aviation, Jazz’s parent company, reported revenues of $1.7 billion and a net income of $101 million in 2012. About 96 per cent of Chorus revenues came from fees paid by Air Canada, which for 2013 are based on an annual minimum guaranteed 331,000 block hours of regional aircraft flying.
Two Tier III airlines fly 18 Beech 1900Ds for Air Canada Express under CPA contracts: Air Georgian (16 aircraft) and Exploits Valley Air Service (two aircraft).
Air Georgian serves Toronto (12 routes), Halifax (six routes) and Calgary (three routes) flying about 320,000 passengers annually. Exploits Valley Air Services (EVAS) links five communities in Newfoundland and Labrador.
WestJet launched passenger service in 1996, emulating Southwest Airlines’ low-cost carrier business model, including an all-Boeing 737 fleet.
“When Gregg Saretsky became president and CEO of WestJet, many believed it was only a matter of time before WestJet expanded into the regional airline market,” observed one experienced regional airline executive. “During the time Saretsky was an executive at Alaska Airlines, he witnessed firsthand the financial contribution Horizon Air’s Q400 turboprops made to Alaska’s bottom line.”
WestJet took delivery of its 100th Boeing 737 in December 2012; and this June, Encore will receive its first two 78-seat Bombardier Q400 turboprop aircraft, with five more coming by the end of the year.
Photo: Bombardier, WestJet "Encore' Bombardier Dash 8-400Q.
Encore’s Q400s will serve smaller communities that WestJet has never served before, such as Nanaimo and Fort St. John in B.C. They will also fly new point-to-point routes and supplement the airline’s Boeing 737 flights at off peak times, initially in Calgary, Edmonton, Grande Prairie, and Saskatoon.
In October 2006, Porter Airlines launched scheduled service from Billy Bishop Toronto City Airport. The downtown airport location next to Toronto’s central business district has been served by many airlines, but none had the start-up capital Porter secured to “do things right.”
Photo: Eric Dumigan, Bombardier Dash 8-Q400
Since 2006 Porter’s fleet has grown to 26 70-seat Q400s, with Porter serving 13 destinations in Canada and six in the U.S.
The next growth milestone could come as early as 2016, if Porter wins approval to fly 107-seat Bombardier CSeries CS100 jets from Billy Bishop to cities such as Calgary, Vancouver, Miami and Los Angeles. On April 10, Porter announced a conditional purchase order for 12 CS100 jets, options for 18 more, and purchase rights for six Q400s.
To complete the CS100 deal, Porter requires several amendments to the 1983 Tripartite Agreement (signed by the City of Toronto, the federal government and the Toronto Port Authority) to permit jet operations (other than medical and air show flights) as well as approval of a “modest 168-metre [550 foot] extension into the water at each end of the existing main runway” to increase the length from 3,988 feet to 5,092 feet.
The CS100 is designed to operate from short runways at Stockholm Bromma Airport (5,470 feet) and London City Airport (4,327 feet). Porter said CS100 flights to cities up to 2,950 nautical miles from Toronto will bring an additional 1.4 million annual passengers through the airport by 2020, and create 1,000 new airline jobs.
In 2010, Porter opened a new $45 million, 150,000-square-foot passenger terminal at Billy Bishop Toronto City Airport. For the 2012 calendar year, the airline carried 2.45 million passengers versus 2.13 million in 2011, an increase of 15 per cent.
By late 2013, Porter hopes to reach the trans-border passenger threshold required in order to apply for a U.S. Customs and Border Protection (CBP) pre-clearance facility, needed to serve New York LaGuardia and Washington Regan airports which don’t have customs facilities.
Currently, the Toronto Port Authority is constructing a tunnel from the mainland to the island airport to accommodate an 800-foot pedestrian walkway that will open in Spring 2014.
SMALL BUT SUCCESSFUL
Every region of Canada has a few independent regional airlines serving niche markets and staying out of the way of the big guys.
Provincial Air Lines (PAL) of St. John’s, N.L., flies a route network linking communities in Newfoundland and Labrador, Nova Scotia, New Brunswick and Quebec with a fleet of two Saab 340As and five Dash 8-100/300s. Its partner, Innu Mikun Airlines, flies Twin Otters and Beech King Airs to small communities in northern Labrador and Quebec.
Photo: PAL, Saab-340
In the fall of 2012, PAL launched three times weekly service from Halifax via Charlo, N.B., to the booming mining town of Wabush, N.L.
Pascan Express of St. Hubert, Que., operates 28 aircraft flying about 80 segments a day between 18 communities in Quebec, Labrador and New Brunswick. The airline transports more than 100,000 passengers a year.
Pascan launched service in 1999 from Montreal’s St. Hubert airport, flying Pilatus PC-12s and later upgrading to King Air 100s and then to BAe Jetstream 31s (14 now in service), introducing the first of three ATR 42s in mid-2012.
The point-to-point carrier flies a lot of routes between small communities that never had non-stop service before. This has stimulated the growth of same-day return business travel. Schedules are timed to allow passengers from different regions of Quebec to connect at small airports like Mont Joli and Sept-Îles.
Most of Pascan’s flights depart from FBOs or its own facilities, rather than from airport terminals; this reduces passenger transit times and increases airline flexibility.
Photo: Michael Durning, Pascan JetStream32
The airline’s first two ATR 42s entered service in 2012, operating from Quebec City and St. Hubert, with the third ATR 42 arriving this summer to support Pascan’s launch of scheduled service from Montreal-Mirabel airport to eight destinations.
Bearskin Airlines of Thunder Bay, Ont., flies east-west routes across Northern Ontario with a fleet of 17 Fairchild Metros, and also provides the only domestic turboprop service at Waterloo Regional Airport to Ottawa.
Photo: Eric Dumiga, Bearskin Fairchild Metroliner
In 2011, Bearskin Air was purchased for $32.5 million by Exchange Income Corporation (EIC) of Winnipeg, which has become a significant investor in the regional airline industry since buying Perimeter Aviation in 2004; Keewatin Air in 2005 and Calm Air International in 2009.
West Wind Aviation of Saskatoon, Sask., operates two separately-branded regional airlines serving southern and northern routes.
Express Air flies a shuttle service between Saskatoon and Regina with a pair of Jetstream 31s, which use West Wind’s Shell Aerocentre FBOs as terminals.
Pronto Airways operates Beech 1900Cs on northern routes from Saskatoon and Prince Albert, serving Points North, Wollaston Lake, Stony Rapids, Uranium City and Fond du Lac in Saskatchewan, and Rankin Inlet and Baker Lake in Nunavut.
For the past 14 years, Integra Air has been flying under the radar. It operates scheduled service between Lethbridge, Alta., and Edmonton. The Lethbridge-based airline started life flying into Edmonton Municipal Airport, where city politicians restricted airlines using the airport to a maximum of 10 passengers.
When Integra moved its service to Edmonton International in 2005, it upgraded to a larger capacity Jetstream 31, which had more revenue potential and lower seat mile costs.
In 2010, Integra broadened its business base when it bought Bar XH Air in Medicine Hat, Alta., the primary fixed-wing medevac operator in southern Alberta. Now, the ambitious airline is positioning itself to eventually become “a third tier feeder to WestJet” and to support this goal, it will welcome its first Saab 340B in June or July 2013.
British Columbia’s rugged mountain ranges and island-dotted coast have long supported airlines that offer significant time savings compared to surface travel by road or ferry.
Nowhere is this more evident than in downtown Vancouver and Victoria, where appropriately-named Harbour Air has 14-passenger DHC-3T Turbo Otters and 19-passenger DHC-6 Twin Otter seaplanes departing from its docks every half hour on weekdays.
Photo: Flyvertosset, Harbour Air Turbo Otter landing at YVR Southside Floatplane Terminal in the Fraser River.
An excellent example of market stimulation, Harbour Air flew about 200,000 to 220,000 passengers on the downtown route in 2012; and between 300,000 and 400,000 passengers across its route network, which grew with the purchase of rival Westcoast Air in 2010 and Whistler Air in 2012, which boosted the fleet to 53 seaplanes – the largest fleet in the world.
The airline acquisitions also gave Harbour Air strategic terminal and dock locations at Whistler’s scenic Green Lake and Victoria’s Inner Harbour, where a modern seaplane terminal will be built to also serve Kenmore Air of Seattle, Wash.
In Vancouver, Harbour Air reached a mutually agreeable settlement with Vancouver Harbour Flight Centre (VHFC), which cleared the way for the airline to move to the modern facility on Nov. 1, 2012.
Harbour Air spent an estimated $2 million customizing the terminal and dock facilities to meet its requirements; and effective Dec. 1, the carrier introduced a $9.50 per passenger terminal fee for all flights departing from and arriving into the Vancouver Harbour.
K.D. Air began flying 20-minute Piper Navajo routes 22 years ago, linking Qualicum Beach on Vancouver Island with Vancouver Airport and Gillies Bay on Texada Island, using a modest fleet consisting of a Navajo, a Navajo Chieftain and a Cessna 172.
Originally an aircraft leasing company, the airline’s two female founders – Ketty and Diana – found themselves with an idle Piper Navajo when Alberni Airways ceased operations. Darryl Smith, founder of Pacific Coastal Airlines, suggested they start an airline and take over his Qualicum Beach routes. And so, K.D. Air was born.
The airline also provides regular service to Port Alberni with a shuttle van that connects downtown hotels to its Qualicum Beach flights. The van was introduced when K.D. Air recognized that it couldn’t provide reliable year-round service into Port Alberni airport because of the frequent poor weather.
Meanwhile, in Northern B.C., three airlines – Central Mountain Air, Hawkair and NT Air – with a combined fleet of 27 aircraft, share common ownership and support each other’s scheduled flights. Their routing system is broad, serving 16 communities in B.C. and five in Alberta, including four code-sharing routes feeding Air Canada in Vancouver.
Northwest Air of Fort Smith, NWT, entered the scheduled airline business flying to northern communities, but in the last decade has expanded to the south by adding service from Edmonton to Fort Smith and Hay River, NWT, and Fort McMurray and Fort Chipewyan, Alta. In 2006, Red Deer Airport management encouraged Northwest Air to develop scheduled service to former RCAF Station Penhold, located halfway between Edmonton and Calgary. The market was tested with Jetstream 31s but service was suspended because the J31 “lacked the ‘hot and high’ performance” required for routes to Fort McMurray and Kelowna, B.C.
After a two-year break, Northwest Air resumed flights to Fort McMurray and Kelowna from Red Deer in April 2012, utilizing a higher performance Jetstream 32. On March 3, 2013, the carrier extended its Kelowna route west to service Abbotsford airport.
Whether large or small, Canada’s regional airlines serve an essential purpose, providing frequent service and connecting smaller communities with larger centres – and, ultimately, with the world. In a country as vast and sparsely populated as Canada, these operators draw on the entrepreneurial traditions of northern bush pilots and commuter airline pioneers to connect Canadians.
Source; skiesmagazine, Kenneth I. Swartz
Thu, May 9 2013 4:07 PM
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