AIRCRAFTAIRLINEAVIATIONINSIGHTS

NewLeaf Travel – How Well Does It Compete With Others?

NewLeaf Travel Boeing 737-400 Aircraft

We reported earlier that NewLeaf Travel will begin commercial operations by February 2016 (News – January 7, 2016). Introductory fares start at CDN$89 to CDN$149 (tax included). In this insight, we will examine how competitive its product mix is against the incumbent airlines (Air Canada, WestJet, and Porter Airlines).

NewLeaf Travel

Analysis

Air Canada, WestJet and Porter Airlines all offer low fares with less travel perks. We complied a list of the most important perks passengers look for based on booking the lowest fare option within Canada:

Airline / Travel Perks (Prices in CDN$ before tax) NewLeaf Travel Air Canada WestJet Porter Airlines
Call Centre Booking $15 Free  Free  Free
Advanced Seat Selection $10-30 $10-99 $5-177 $20-40
Frequent Flyer Reward Program Not Available Aeroplan WestJet Rewards VIPorter
Personal Bag  (under seat) 16cm x 33cm x 43cm (6 in x 13 in x 17 in) / Up to 10kg (22 lbs) Free Free Free Free
Carryon Bag (overhead)  23 cm x 40 cm x 55 cm (9 in x 15.5 in x 21.5 in)  / Up to 10kg (22 lbs) $25-80 Free Free Free
First Checked Baggage 158 cm (62in) in total linear dimensions / Up to 23kg (50 lbs) $25-70 $25 $25-29.5 $25-35
Second Checked Baggage 158 cm (62in) in total linear dimensions / Up to 23kg (50 lbs) $35-90 $35 $35-41.3 $35-45
Additional Checked Baggage 158 cm (62in) in total linear dimensions / Up to 23kg (50 lbs) $75-125 $100 $100-118 $90-100
Overweight / Oversize Baggage $75-150 $100 $77-88.5 $75
Travelling with Pets in Cabin (Count as carry on for Air Canada) $75-100 Free $50-59 $50
Online Checkin Free Free Free Free
Airport Checkin $10 Free Free Free
Unaccompanied Minors $110-125  $100 $100-118  $100
Priority Boarding (as standalone option)  $10-15  Not Available  Not Available Not Available
Change Fee Prior to Checkin > 24h $75-100 [1] > 24h $75 [2] > 24h $75-88.5  >24h $75
Same Day Change Fee $75 $100-150 [2] $75-88.5 [2] $150
Cancellation (all are non-refundable, can change to different date) $75 [3] $75 [2] $75-88.5 $75
In flight Entertainment None Free Free None

[1] – allows name change, {2] – change fee plus potential fare difference, [3] can change to different flight and use fare from 90 days to 1 year. The ticket amount would be forfeit after deadline.

NewLeaf Travel are charging fees for travel perks that are the same or higher than its competitors. This is particularly the case for baggages. Passengers with a carry on larger than a laptop bag or a purse will have to pay between CDN$25-80. Similar to other ultra low cost carriers, fees are the lowest when paid at booking compared to at check in or at the gate.

Fare

Of all the routes served by NewLeaf Travel, the one that all four compete together is between Hamilton (YHM) / Toronto (YYZ/YTZ) to Halifax (YHZ). All except Porter Airlines have non-stop flights. The Billy Bishop Toronto City Airport (YTZ) based Porter Airlines flies direct to Halifax with a stop (without changing planes) at Montreal’s Pierre Elliott Trudeau International Airport (YUL).

Hamilton : Toronto to Halifax Flight Map
Hamilton : Toronto to Halifax Flight Map

Air Canada has the most non-stop / direct flights between Toronto and Halifax with WestJet and Porter Airlines follow behind. All flies with mostly narrowbody aircrafts on this route (Boeing 737s, Airbus 320 Family) except for Porter Airlines which uses Q400s.

Hamilton / Toronto to Halifax Flight Analysis
Hamilton / Toronto to Halifax Flight Analysis
Source: Fare from Air Canada, WestJet, Porter Airlines and NewLeaf Travel. Information is accurate at the time of publication and may have changed.

Porter Airlines jumps over WestJet when both non-stop/direct and connections are taken into account. Air Canada leads with at least 20 options available.

Hamilton / Toronto to Halifax Flight Analysis
Hamilton / Toronto to Halifax Flight Analysis
Source: Fare from Air Canada, WestJet, Porter Airlines and NewLeaf Travel. Information is accurate at the time of publication and may have changed.

We reviewed total fare costs for all airlines with travel dates of February 12, 2016 (outbound) and February 15, 2016 (inbound). Note that WestJet is the leader out of the four airlines. Its total cost of CDN$195.14 is 30%+ lower than NewLeaf Travel. Additional transportation costs are required for Hamilton residents to go to Toronto and vice versa.

Hamilton / Toronto to Halifax Fare Analysis
Hamilton / Toronto to Halifax Fare Analysis
Source: Fare from Air Canada, WestJet, Porter Airlines and NewLeaf Travel. Lowest fare was picked with February 12 (outbound) and February 15 (inbound). Fares are at the time of research and may have changed.

Since NewLeaf Travel does not include a carry on baggage (which others do), we re-priced the total cost with  that option picked. In time case, WestJet has a total cost that is 44% lower.

Hamilton / Toronto to Halifax Fare Analysis
Hamilton / Toronto to Halifax Fare Analysis
Source: Fare from Air Canada, WestJet, Porter Airlines and NewLeaf Travel. Lowest fare was picked with February 12 (outbound) and February 15 (inbound). Fares are at the time of research and may have changed.

Competition

NewLeaf Travel

NewLeaf Travel’s initial route network avoids cities that are main hubs for its key competitors. This includes:

Airlines Air Canada WestJet Porter
Key Hubs/Cities Toronto (YYZ), Montreal (YUL), Vancouver (YVR) Toronto (YYZ), Calgary (YYC), Vancouver (YVR) Toronto (YTZ)

This will lower the amount of direct non-stop competition it will face (except for its Hamilton to Halifax route noted above) with them as the company expands service though adding more frequencies. Many of its scheduled flights would be operated as a monopoly which is ideal.

While it may not take on direct costs of aircraft ownership and maintenance, the company will depend on Flair Airlines to deliver service. Irregular operations may lead to complications as they are separate companies.  Maintenance or weather challenges may impact downstream flights more significantly as replacement aircrafts are not readily available. It will also have to price fares low enough to attract new passengers.

Air Canada

Air Canada competes indirectly with NewLeaf Travel through its operations at Toronto Pearson International Airport. For the time being, NewLeaf Travel would not be a threat to the national airline.  It is unlikely that Air Canada will lower its prices significantly to match NewLeaf Travel for the time being. It will however monitor flight pairs for any demand fluctuations.

WestJet

WestJet is based out of the west coast and create more competition.  It has a better route network. Its passengers heading from Abbotsford or Kelowna to Saskatchewan/Manitoba may need to connect through Calgary which could lead to some inconvenience. However, the airline already prices various western Canada routes operated by NewLeaf Travel at the same or lower levels. This is the same case for east coast flights as noted from the analysis above. This scenario will continue as WestJet is also a lower cost carrier.

Porter Airlines

Porter Airlines’ dream to expand its hub at Billy Bishop Toronto City Airport died with little to no support from various levels of government (News). It might need to search for other bases to introduce jet service.  NewLeaf Travel’s entrances into Hamilton and Winnipeg may pose a challenge in the future.

Here are a few possible options Porter Airlines could consider:

  1. Form a strategic partnership with NewLeaf Travel to use the passenger feeds for its US flights
  2. Build a hub in Hamilton and/or Ottawa (YOW) and not compete with NewLeaf Travel
  3. Build a hub in Hamilton and compete directly with NewLeaf Travel
  4. Do nothing

Low Hanging Fruits

Experience The Skies reviewed NewLeaf Travel’s business case. The following is a list of low hanging fruits of improvement for consideration:

  • Add a 1-800 number for passengers to book flights
  • Pricing needs to be tweak further to get more engagement like Spirit Airlines (e.g. $19 one way as an introductory price).
  • Introduce other perks like TravelFlex that will differentiate itself from the competition
  • Use social media to appeal to passengers looking for no-frills/ low cost experience
  • Build an easy to use rewards program (e.g. buy ten get one free)
  • Partner with a transportation company to transfer potential passengers from different Toronto spots to Hamilton for free or at a discount. It would otherwise be significantly less attractive for Toronto residents to fly from Hamilton due to additional time and costs.

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