Canadian Aviation: a Now or Never moment
Canada is a weird market for flying, for a few reasons. The country is massive, relatively sparsely populated, subject to some rather extreme weather for a good chunk of the year and has chronically suffered from a lack of competition for years.
The Now or Never moment for Canadian aviation
Perhaps this comes at a weird time with coronavirus, and the growing movement around a greener economy, but one shall pass and the other is a tough point when you consider the state of rail travel in Canada. More on that later.
We live in a world where incumbents of industries are swarming around the same things as their peers, new entrants are challenging the status quo and societal change continues to accelerate. Many organizations have a short window, a moment, where with courage and guts, they can differentiate. I call that a Now or Never moment. By that definition, I think we’re on the cusp of one in Canadian aviation.
tl:dr?
- Protectionist regulation is enabling the Air Canada + WestJet duopoly to rip customers off
- It’s time for an outsider to challenge the legacy thinking
- Airlines and airports need to become more commercial in how to earn ancillary revenue in the terminal and on the plane
- A chance to rethink beyond the typical airline loyalty frameworks
- The Canadian dream is an opportunity to enhance our airline and airport experiences
- Learn from Europe and create the demand to travel off the beaten path, make the likes of Moncton, Gander or Kelowna the next hot travel destinations
- Think bigger, why the airlines should be the ones building hyperloops, exploring electric flight and creating a new generation of airport cities
The absence of a LCC (low cost carrier)
The likes of Ryanair and EasyJet transformed aviation in Europe, Air Asia did much the same in Asia to be followed by the likes of IndiGo, JetStar and Nok … even South America has Sky and Gol. The US has Frontier, Spirit and Southwest.
Canada hasn’t seen this, until very recently with Flair became a thing in 2017, growing slow and steady… and maybe Swoop, WestJet’s LCC arm.
This is normally the time when people in Canada start to use size and population as an excuse (see banks, telecoms, utilities as an example) … before you start, I’m not being it. Australia has Jetstar, Tigerair and to some extent, Virgin in a country with a smaller population. I’ll use the same point with banks on a future one of these.
As it stands today
Air Canada will proudly tell you they’re the only 4* airline in North America and consistently ranked the best by Skytrax. This much is true. I’d also say that’s often been thanks to being the best of a bad bunch and under threat as Delta start to get really quite good and even United wake up and recognize it might help to be nice(r) to the people who give them money.
ThePointsGuy can sum Canada’s national carrier up nicely:
WestJet started out saying they were actually competing against Toyota or Ford, getting Albertans out of their cars and onto their planes. It worked. So well in fact that they became a second national airline, and now have sights on becoming a truly global competitor. In doing that, they’ve also become more of a copycat me too product, they’ve done it so well that sometimes their big rival is the one copying them.
Whether it’s cabin interiors (WestJet’s 787 looks near identical bar the colour to Air Canada), baggage fees, fares or even flight times, there is often little to separate the pair of them.
Swoop (admittedly owned by WestJet) and Flair might start to change that as they start to look to secondary airports, routes, fewer frills (if that’s possible), however competition is also diminishing with Air Transat being acquired by Air Canada.
What’s left is a regional player in Porter being restricted to flying ancient turboprops thanks to some nimbyism from Toronto waterfront residents and a budget leisure airline in Sunwing.
The opportunities
So where do we go from here? A quick fare check for two comparable-ish routes between Canada and the UK gives us a feel for the fat in the market. To fly a week from the time of writing between Toronto and Montreal, the cheapest fare I get is a whopping CAD$294 one way on Porter, Air Canada sits at over CAD$400. Meanwhile, a BA flight from London (Gatwick) to Edinburgh, a route with a pretty similar customer of business and leisure is as low as CAD$64, even travelling out of Heathrow is barely over CAD$100. There is fat in this market, for sure!
Investment rules changing — a chance for outsiders to shake it up?
Canada recently changed the rules on foreign ownership of an airline, upping the amount that can be owned from 25% to 49%, though any individuals and other foreign carriers are still capped at owning just a quarter.
But this is progress, imagine if we brought some of the external learning, capabilities, vision and capital from people who’ve done it elsewhere and applied it here? Now that might not be so good for the bottom line at Air Canada or WestJet, but the impact that can have across the country could be huge.
Could that help reduce the travel burden on many Canadians looking to travel, whether to spend time with family & friends, see the world, do business in other locations or even reduce the pressure on a housing market like Toronto through remote workers from say Halifax being able to be based in the Maritimes and connect in person with clients/colleagues in Toronto when they need to.
If Virgin Canada could be anything like their Australian and now departed America cousins, we’d be in for a much more competitive and healthy market.
Underutilized ancillary revenue opportunities that actually enhance the customer experience?
Something always strikes me when I travel from a British airport compared to a Canadian one, and for that matter, on an easyJet rather than a WestJet flight. British airports (and many Asian ones for that matter) are much more like shopping malls than they are transportation hubs, while Canadian (and most US ones too) feel like warehouses for people. Yeah, there’s stores, but it’s almost like they exist for decoration rather than utility.
The mega line up at every airport Tim Hortons should surely be a clear sign the rest of the proposition isn’t very appealing!
A WHSmith beats a Relay any day of the week, there’s always a Boots when there’s never a Rexall or a Walgreens, the duty free feels more enticing to look inside (maybe that’s a lie, you’re forced to walk through it to get to the departure lounge), there’s more food options, it’s the cultural norm for many to sink a pint in the Wetherspoons at 6am on a Friday before your flight to Prague… and I can buy a luxury item too if I feel so inclined.
On the plane too, Ryanair pretend they want to make me a millionaire with of their scratch cards, the food options (which still taste terrible btw) go beyond the plastic cheese plate, AirAsia push their merch, other airlines have curated a collection of things that someone might find desirable. Air Canada sells the same shit you can buy anywhere else for a higher price, Flair didn’t even bother to take advantage of the opportunity of the captive audience with no in-flight entertainment.
Secondary airports in most markets thrive off their ancillary revenue, for many budget carriers, that extra income is critical to their success, but in Canada, we seem to not worry about it (likely because the fares, and baggage fees are already fat), but why wouldn’t you chase a new market and revenue opportunity?
A chance to think about loyalty differently
With Air Canada coming out with their replacement to Aeroplan later in the year, it’s a good time to reflect on airline loyalty. After all, the thinking behind loyalty hasn’t really changed in a long time. Miles flown, segments flown, dollars spent = some perks. Fair enough.
But what it overlooks is the masses, yes a significant portion of revenue comes from business passengers racking up the miles on expenses, but what about the masses. Those who travel a few times a year, are ultimately price sensitive, care more about the schedule than the colour of the tail fin. How could you encourage them to book directly with you vs. making the default a search on Kayak or Expedia?
Instead of your airline credit card earning you airline miles over the course of the year, what if instead it gave you the opportunity to win your travel? Would people give up a mile a dollar and instead wager that on winning flights or travel perks with a specific airline? Could gaming or lottery products as simple as a scratch ticket add a little joy to the in-flight experience? A chance to win an upgrade or even just a free drink?
What I’m saying is an airline that breaks free of the traditional loyalty mechanisms might create the most loyal customer base among the mass market spending their own money on their travel.
Trump and immigration — has the American dream has moved north?
Who writes anything without discussing the impact of Donald Trump? Anyway, the increasingly more hostile immigration policy has driven a generation of hopeful migrants north, to join outposts of tech behemoths like Amazon or Google in Vancouver or Kitchener/Waterloo, homegrown talents flag bearers like Spotify or a new generation of startups.
With improving career and entrepreneurial opportunities, comes population growth, greater demand for travel as well as growing tourism from friends and family. Here lies an opportunity to create an amazing Canadian experience, beyond the bland air travel to get you here and impacting the arrival experience. It’s hard to rival US border and customs agents for surliness, but Canada does that very well. Anyone not American or Canadain arriving at Pearson Terminal 1 or worse, Calgary, from an international location will know what I’m talking about.
Imagine if the airport experience matched up to the real Canadian experience? You know who is on the plane, when they’re arriving, where they’re arriving from. Maybe don’t require the queuing, form filling, and also create an arrivals terminal environment that makes you feel good after that long flight.
And how might you keep them coming back?
Alternative destinations — a chance to turn the less visited parts of Canada more popular tourism destinations?
One of the big impacts of low cost airlines on Europe has been shifting how people travel and vacation. Scores of Brits have acquired holiday homes on the continent, including many discovering parts of the likes of France well beyond the trodden path.
Ryanair created demand for routes that previously never existed, opening previously dormant airports and ultimately building a reliance on (if not a loyalty to) the airline.
Now how might we do that in Canada? Imagine if cities and provinces worked with the airlines to create an awareness of, and a desire to travel to the less well known parts of the country. Perhaps we should be trying to grow the market that doesn’t exist today rather than milking the cow harder?
How might somewhere like Winnipeg become more of a city break destination? (has nobody called the New York Times for their “36 Hours” feature?). How can the aviation industry make more of Edmonton’s challenger city credentials in AI & ML generating business travel.
How might greater tourism opportunities be had beyond the traditional extra charter flights to/from places like Gander, Moncton or Kelowna? Could Nova Scotia become better cottage country to Torontonians than Muskoka? A bit of a different way to beat the traffic and increasing real estate prices.
Technology & infrastructure — does being behind present the opportunity for bigger thinking like hyperloop / high speed rail, new aviation technologies or rethinking of future cities?
A more ambitious opportunity, but still timely. With so much of the Canadian population residing on the 401 corridor between Windsor, London, Kitchener, Toronto, Montreal and Ottawa, not to mention the proximity to Boston, NYC, Detroit & Chicago, should we look to relieve the burden on short-ish haul flights and the car to high speed rail or hyperloop like alternatives?
In the absence of a visionary government, why shouldn’t this be the future of Air Canada? As a brand that will come under ever increasing scrutiny from the environmental movement and general public, this could be a great piece of foresight and the long term future of the business. Imagine how an airline hub like Pearson or a future new airport at Pickering could be a centerpiece of this, connecting Canada to the world, and shuttling people onward to the US.
Closer to today, thinking about airports as hubs beyond the immediate passengers, there’s a massive gap in thinking for the tens of thousands of employees there. If we re-imagined places like YYZ or YVR as an airport city, what might that mean for the passengers, employees, businesses and local communities. Instead of offices our near the airport being dead zones where people no longer wish to work, how could we make employment opportunities based there more desirable? As more and more businesses look to an overheating downtown real estate market in Toronto, imagine if we made the airport somewhere people wanted to work thanks to desirable living spaces, attractive employment opportunities, communities that draw people in and public transit networks that are actually thought through?
And then we have electric flight, something Canada is actually showing some leadership in with tiny Harbour Air out of Vancouver showing the potential for electric commercial flight in the near future.
If we’re being realistic, this isn’t going to have a huge impact anytime soon, but being at the forefront of this will make aviation here much more sustainable, which we all know it needs to be. Norway has set some ambitious goals to make domestic air travel all electric by 2040, something we should be inspired by. Greta has (rightly, in my opinion) put the spotlight on air travel, making many in Europe conscious about their travel choices, now the industry needs to do something about it.
Now check out nowornever.network & label.ventures to learn about a world of pioneers who can help show you the way to make some of this a reality.
