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Group of industry vets propose new airline

Nov. 28, 2013, Vancouver - A group of aviation veterans is looking to launch a new ultra-low cost carrier in Vancouver next fall that carries the potential of significantly cutting the cost of travel in Western Canada.


November 28, 2013
By The Financial Post

Canada Jetlines Ltd. will fly under the moniker “Jetlines.” It is
being launched by aviation veterans Jim Scott and David Solloway as well
as Dix Lawson and has garnered the support of the provincial government
in B.C.

 

Mr. Solloway, who will serve as Jetlines’ chief commercial officer,
said the trio believes there is room in the Canadian market for an
ultra-low cost carrier and their plans have been met with overwhelming
support from potential investors.

 

“We think there’s a vacuum,” Mr. Solloway said in an interview. “We think we can fill it as a British Columbia-based airline.”

 

“There isn’t an [ultra-low cost] model in Canada,” he added.

 

Vancouver’s Salman Partners Inc. is raising $100-million in financing
for the launch of Jetlines, and Robson Capital Markets Advisory is
looking to raise $26-million, Mr. Solloway said.

 

The airline will be modeled after successful ultra-low cost carriers
like Ireland’s Ryanair, Allegiant Air and Spirit Airlines in the U.S.,
and Air Asia and Scoot Airlines in Asia, offering no-frills service for
lower prices than its competitors.

 

Jetlines has already applied for an airline license to operate large
aircraft in Canada, according to the Canadian Transportation Agency.

 

It has also negotiated landing slots in both Vancouver and other key
airports in Western Canada, according to an investor briefing obtained
by the Financial Post.

 

The plan calls for the airline to launch with two Airbus A319s in the
fall of 2014, and expand to 16 aircraft by 2017 using a fleet of A319s
and A320s. Jetlines has already hired about 25 people.

 

Mr. Solloway began his career at Canada Pacific Air Lines before working
in the Asian operations of several U.S. carriers. He also filled
positions at Oasis Hong Kong Airlines and acted as an advisor for Air
China. Jim Scott, Jetlines chief executive, formerly worked at Cathay
Pacific.

 

Jetlines would be based in Vancouver and aim to fly to underserved
markets or those without any service. Potential destinations include
Prince George, Winnipeg, Kamloops, Prince Rupert, Regina, and Edmonton.

 

Eventually, it aims to add international destinations like Orlando, Cancun, Las Vegas and Cabos St. Lucas.

 

Of course, for any of this to become a reality, the trio will have to
get the plan off the ground and garner the support from investors. It
also needs to ensure its investors meet the ownership caps in Canada
that prevent foreign entities from controlling more than 25% of voting
shares in Canadian airlines.

 

“We’re still in the preliminary stages, so we’re not an operational
entity now,” Mr. Solloway said.

 

“But we’ve had such an overwhelming
response.”

 

At the same time, the trio is not the only group looking to launch an ultra-low cost carrier either in Canada.

 

Calgary-based charter operator Enerjet is also rumored to be looking
for financing for its own ultra-low cost operation, a source with
knowledge of the situation said.

 

The push comes at time when both Air Canada and WestJet are reporting record profits.

 

To say the least, launching an airline in Canada is not without its
risk. The landscape of Canadian aviation is riddled with the carcasses
of several failed low-cost ventures, including JetsGo and Canada 3000.

 

Ultra-low cost carriers offer bare-bones, point-to-point flights with
fares that often come at a significant discount to those offered by
higher-cost rivals.

 

Ben Cherniavsky, an industry analyst with Raymond James, said the
market in Canada is ripe for such a carrier because an airline like
WestJet Airlines Ltd. no longer fills the role as it grows and develops
into a more mature — and more expensive — airline.

 

“WestJet’s not ultra-low cost anymore, “ he said.

 

At the same time, Air Canada and WestJet have enjoyed a fairly
comfortable duopoly in the Canadian domestic market in recent years that
has allowed them to steadily increase fares.

 

A new ultra-low cost competitor would be a “major risk” to that competitive landscape, Mr. Cherniavsky said.

 

According to the investor briefing, Jetlines plans to offer flights
at a significant discount to those currently offered by Air Canada and
WestJet to destinations west of Winnipeg. For example, the lowest fare
between Vancouver and Prince George currently costs $144 on either Air
Canada or WestJet but would cost $72 on Canada Jetlines.

 

The airline proposes to drive up extra revenue by charging for extra
services like checked and carry-on bags, priority boarding, premium
coach seats, on-board food and snacks, and in-flight iPads and
earphones. It also proposes charging for other less conventional
services, including potentially in-flight nanny services.

 

The airline also aims to launch an initial public offering of the
company’s shares in 12 to 24 moths after launch, according to the
investor briefing.