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Features Operations
One-on-One: Paul J. Phee, QuikAir President

The key to our success has been that we’ve stayed in our niche.


September 27, 2007
By Darren Locke

Topics

348-pheeQUIKAIR HAS BEEN OPERATING SINCE 1999 AS A SCHEDULED SHUTTLE AIRLINE
BETWEEN EDMONTON AND CALGARY. YOU NOW OPERATE MULTIPLE FLIGHTS DAILY
AND OVER 6,000 FLIGHTS ANNUALLY. WHAT HAVE BEEN THE KEY REASONS FOR
QUIKAIR’S SUCCESS?

When
I wrote the business plan for QuikAir, I had to approach it with the
tack that we had to come to the marketplace with something relatively
special to compete with established carriers like WestJet and Air
Canada. The way I got QuikAir established was I found a niche for it,
and that was the Edmonton City Centre Airport. The fact was, at the
time that I started it, there wasn’t anyone providing that service at
Edmonton City Centre, and there was an untapped ability for a small
carrier, niche product provider, to really get in there and look after
a small customer base.

The key to our success has been that
we’ve stayed in our niche – we’ve focused on, not load factors or
anything like that; we’ve focused on catering to high-yield customers
that want it, who were able to pay for a service that focuses its
efforts on providing a very time-effective business travel solution.
I’ll give you some stats – we’re a private company, so we’ve never ever
published our stats, but we’ve averaged over the past 4 to 5 years load
factors in the 88 per cent range, and yield per seat mile of close to a
dollar. So statistically, it’s a great business model.

YOU’RE
NOW OPERATING 24 DAILY FLIGHTS BETWEEN CALGARY AND EDMONTON USING THE
BAE JETSTREAM AIRCRAFT. HOW HAS THIS TURBOPROP PERFORMED FOR YOU OVER
THIS ROUTE, AND HOW WOULD YOU RATE IT VERSUS SIMILAR AIRCRAFT TYPES
SUCH AS THE BEECH 1900?

The Jetstream was picked because it had
an established track record. The main reason we chose it is that its
capitalization cost is significantly lower than the Beechcraft, and its
operating cost was also significantly lower because the Garrett engines
(Garrett TPE331) burn significantly less fuel than the Pratt &
Whitney engines.

The other part of your question, about how does
it operate on that corridor. Well, given that it’s 150 miles basically
from Edmonton to Calgary, we found that regardless of whether you’re
using a jet or a turboprop, the benefits of the aircraft’s speed were
not recognized on a short haul like that. So that to find an aircraft
that had a block speed of 220 or 230 knots was as effective as an
aircraft with a block speed of 300 knots; the difference was negligible
on a 150-mile leg.

HOW HAS QUIKAIR’S PASSENGER PROCESSING IN
CALGARY BEEN OPTIMIZED TO REDUCE THE TIME NEEDED FROM CHECK-IN TO
DEPARTURE AS MUCH AS POSSIBLE?

In Calgary we’ve had the good
fortune of maintaining a private passenger terminal facility at Calgary
International Airport, and that’s really been a huge advantage to
QuikAir in helping to find a way that is different from the other
carriers. We’re not dealing with massive volumes – we’re dealing with
business travellers that put a lot of value on moving quickly and time
savings. In Calgary we leased a building beside the passenger terminal,
and there’s a 100-car parking lot adjacent to it that we give our
passengers access to for free. Really, that expedites the whole process
of arrival, departure, passenger handling, getting to and from the
airport. That was our big plus with Calgary departures, as well as
Calgary arrivals.

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We did the research, we have 95 per cent
repeat business. So that tells you you’ve got to be doing something
right, when you have a huge amount of repeat business. Our core
passenger base is maybe 4,000-5,000 people, so our repeat business is
significant in QuikAir’s business model.

AS AN AIRLINE FOR
BUSINESS TRAVELLERS PRIMARILY, SAVING YOUR CUSTOMERS TIME AND MONEY IS
A KEY ELEMENT OF YOUR BUSINESS STRATEGY. HOW WOULD YOU SAY YOU COMPARE
IN THIS REGARD WITH THE SERVICES PROVIDED BY THE LARGE SCHEDULED
AIRLINES?

We have the benefit of dealing with less people. So if
you’re putting 10 people on a plane instead of 100, you’ve got a huge
advantage over processing time in and out of the gate. A lot of
business passengers resent the fact that they’re paying big bucks to
sit at the front of the plane, while all the $50 fare people are
walking by them holding the plane up for another 20-30 minutes getting
loaded, stuffing all their bags in the overhead bin. So it’s almost
backwards, where they’re paying premium fares for a big seat, but
that’s about all they’re getting. They’re not getting premium service –
they’re still going as fast or as slow as everybody else. So it’s
better to segregate them into a business-class type of environment,
where everybody on the plane is a business traveller. They’ve all got
the same motivation to get from A to B as quickly and safely as
possible.

YOU ALSO STARTED OUT OFFERING NO-CHARGE CHANGE AND
CANCELLATION FEES. IS THIS ANOTHER IMPORTANT ELEMENT OF YOUR PRODUCT
DIFFERENTIATION?

We have changed our air fare structure a bit
over the last month or so, where now we’ve found that we have to start
competing. Here’s an example – for four years QuikAir has had a single
price air fare all the time, and it has worked really well when we were
in our niche at the Edmonton City Centre Airport. People really
appreciated the fact that our fare was one price, it was maintained
without cancellation up till now. The fact that we had to move to the
International, we had to somewhat reinvent our business model, and we
wanted to maintain a certain amount of competitiveness, but we also had
to be competitive in fares. Our customers were coming back saying “I’d
really like to use you guys, but you’re not competitive,” because
you’ve lost a lot of your angle, but you still have the Calgary
facilities and a lot of other good things. So we actually had to go in
and change our pricing into different tiers now, where we offer seats
anywhere from $59 to $159. And we obviously can’t let people change
around if they paid $59 for a seat, but what we’ve said is if you
change we’ll charge you the difference in fare, but we will not ever
charge you for the change of seat, because we don’t think it’s right
that you should be charged for the administrative process of changing a
fare. And we still pay travel agents 10 per cent commission on all that.

IS THERE A SPECIAL PRIDE AT QUIKAIR IN BEING A PRIVATE ALBERTA COMPANY?
Absolutely!
Albertans have been really lucky, you know, because of the oil and gas.
We’re lucky enough to live in a province with lots of good fortune, and
WestJet has been such an inspiration to people like me and other people
to go out there and to be innovative, and to deliver a service that you
truly believe in. When Clive (Beddoe) went out there and started
WestJet he believed in what he was doing – he didn’t just do it because
he needed the money. He did it because he had a real ‘Alberta’
approach, a real entrepreneurial sort of spirit to make a difference.
And I think that’s really the entrepreneurism I felt and worked toward
in developing QuikAir. We embraced the ‘Alberta Advantage’, tapping
into an opportunity in a supercharged economy to help the oil and gas
industry and business travellers get to where they’ve got to go.

YOU’VE NOW ADDED FORT MCMURRAY AND PENTICTON TO YOUR ROUTES. WHAT ARE YOUR REASONS AND WHAT HAS THE RESPONSE BEEN?
The
response has been hard to gauge because we’ve just started marketing
it, and we’re going to get into it in the next couple of weeks. We’re
looking for markets that Calgary is connected with. Fort McMurray, Fort
St. John, and Grande Prairie are heavily tied to Calgary, mostly due to
oil and gas exploration and production. So we went and visited these
marketplaces, and we met with airport authorities and local business
people to discover what the opportunities were. McMurray by far has
tremendous connections with Calgary, and right now the inventory levels
are to the point where there’s plenty of inventory on the corridors,
either direct or with a stop in Edmonton, but on the peak days there
definitely isn’t enough capacity for the number of movements. So what
we’ve done, we’re going to start with McMurray, give it some time to
mature, and then we’re probably going to add Fort St. John and Grande
Prairie in as we develop.

Penticton was a bit of a fluke – we
were contacted by the local business development people in the chamber,
and they said “do you realize how many Albertans own property in the
Okanagan?” And I said I would imagine a fair number, given that a lot
of them are looking for second homes and real estate investments in the
Okanagan. We found that if we took our direct Calgary-McMurray flight
when it came back to Calgary, we could carry on to Penticton with very
little incremental cost. Basically, our aircraft costs are covered for
the day, our Nav Canada, the hard costs of having the aircraft there.
So really the only costs that would be variable would be the fuel costs
and maintenance costs, and it’s about a one-hour flight.

YOU’VE
ALSO DIFFERENTIATED YOURSELF FROM THE PACK WITH QUIKAIR CHARTERS,
MAKING EXTENSIVE USE OF PRIVATE PASSENGER FACILITIES, FBOS AND REGIONAL
AIRPORTS. WHY DID QUIKAIR TAKE SUCH A UNIQUE APPROACH?

We have
the aircraft available during off-peak times, and again we have the
private facility in Calgary, and we felt that these aircraft have few
enough seats that they are actually an economical business travel tool
for groups of four to ten or twelve people. Typically, we have daily
charters with the aircraft as soon as we get off the sched; we go out
there and run business groups of anywhere from four to ten, to twelve,
sixteen people, within a few hundred miles of Edmonton, and they may go
to Fort McMurray or Grande Prairie or Saskatchewan or somewhere in B.C.
I’d say half of it’s business and half of it’s leisure. We found that
we could get greater utilization out of our assets by offering this as
a complementary service to our sched service. And again, the only
reason that it makes any sense is because the aircraft’s seating
configurations are at a number where small groups have an economical
sort of reason that they can charter the aircraft and it actually saves
them money over scheduled air-fare seats.

YOUR CARGO SERVICE HAS ALSO MET WITH GOOD SUCCESS. WHERE DO YOU SEE YOUR CARGO SERVICES HEADED?

We’ve
been able to make a great little business out of just shuttling
envelopes and letters back and forth between Edmonton and Calgary,
almost like a little air freight service. And I think it’s really going
to stay relatively smallscale and a small percentage of our revenue. It
generates about one percent of our revenue, but it’s still a great
little business that fills an empty space in the airplane on most
flights. And it’s very simple – there’s no hazardous goods, it’s geared
toward law firms and courier companies that may have some leftover
packages that didn’t make it on the shipment. It’s a premium service at
an economy rate – it’s usually $10 an envelope. And we have probably
50, 60 companies that use it on a regular basis, that have grown to
like the convenience of getting an envelope between Edmonton and
Calgary in an hour for $10. Again, we found a little niche that wasn’t
filled. We don’t charge the $40 or $50 that you might pay to a big
courier company, and guess what? It helps us pay for the gas.

WHAT DO YOU SEE AHEAD FOR QUIKAIR?
I
think QuikAir is just going to slowly develop some route structure
within Alberta that caters to the oil and gas growth in the economy,
it’s going to try and probably develop a balance between scheduled
service and charter service, and at some point we’re looking at getting
into the 30 (seat) size aircraft in an effort to get into some charter
activity that may go into the U.S. Part of our business is to look at
the markets that may have yield for 30-to-50-seat aircraft, it’s the
leisure markets in the U.S. And again, that could be a few years down
the road.

AND IN CONCLUSION?
I think customers have to
put some value in the small operator. While we don’t operate large
airplanes or have air miles programs and such, without the small
operators, there’s a monopoly.