In Canada, the bravely optimistic four-and-half-year-old Harmony Airways says it is shutting down by next month, a victim perhaps of its own ambitious plans to stress very high levels of service with low fares. And in Mexico, Azteca, a low-fare carrier, also shut down, but not voluntarily.
Harmony was begun by a Vancouver entrepreneur who was infuriated after he was stranded in an airport by a large airline. The heir to large tobacco fortune in China, founder David Ho vowed to do better. With a route in the heavily travelled Vancouver-Toronto corridor and featured flights between Canada's west coast and the Hawaiian Islands and Palm Springs Calif., Ho stressed legroom and in-flight service. He also had brave plans to begin China mainland service. But the domestic service ends at the end of March and other flights end 9 April. Harmony had also operated from Vancouver to Las Vegas, Oakland, and New York and other destinations, but pulled out of new markets quickly if it didn't like the initial reception. In fact, Harmony's own route map indicates scheduled service that it had already abandoned.
Beaten down by the vigorous competition between Canada's two healthy carriers, Air Canada and West Jet, Harmony becomes the latest in a long string of Canadian start-ups to become shutdowns. CanJet Airlines ended flights last September after four years of struggle, proving it can't or couldn't, while Jetsgo, another low-fares start-up, went in March 2005. Harmony's founder, David Ho, says he will not seek bankruptcy protection for the carrier and that it may re-emerge as a restructured company, possibly in the charter-only market. That may be difficult, given the tough competitive environment in Canada and given Dr. Ho's commitment to Boeing 757s configured for 170 seats, which gives Harmony a true cost disadvantage against a plane such as the 165-seat Boeing 737-800 operated by WestJet on some of the same routes.
Azteca is the latest of a long string of Mexico airlines to be shut down involuntarily; federal officials suspended the six-year-old privately held carrier after finding it had violated safety rules and had fallen into a precarious financial situation. Azteca may start up again, as did the most recent Mexican airline to be grounded, AeroCalfornia, which was shut for three months last spring. Azteca has 90 days to prove it deserves to fly again. Azteca's nine-plane fleet is grounded although only four of those 136-seat Boeing 737s were actually in service. And ARC, the Airlines Reporting Corporation, the clearinghouse for payments and, has suspended Azteca, although ARC's Allan Muten says it could reactivate the account.
Azteca had a market share of less than 3% of the nation's domestic market, and all 13 of its routes are served by other airlines. Avolar, Aviacsa, and Alma are all trying to accommodate the passengers but could not do so easily because many of the stranded flyers had electronic tickets and some of the carriers won't be able to accept them until Aztec prints them out.
The interesting fallout is the reactions of the analysts and their predictions: Azteca wont be missed because Mexico is a hotbed of new airline activity, and Azteca has very little unique in its favour; Harmony's final note however, is a sombre note to some observers because the nation's two prospering carriers form a de facto duopoly, and few new entrants have been able to stay on tune.