Less than two years after entering the market, Lynx Air is winding down operations, making the Calgary-based airline the latest in a long line of Canadian discount carriers that have failed to take off.
The company — which rebranded from “Enerjet” in 2021 — cited rising operational costs, high fuel prices, unfavourable exchange rates, increased airport charges and a challenging economic and regulatory environment as reasons for the shutdown.
Other low-cost and ultra low-cost carriers have recently faced difficulties operating in the Canadian market. After functioning as a standalone carrier, Sunwing Airlines was absorbed into WestJet’s regular operations last year for streamlining purposes. Swoop Airlines was met with a similar fate only days later, a few years after its first flight in 2018.
Meanwhile, it was reported earlier this month that Edmonton-based discount carrier Flair Airlines owes $67 million in unpaid taxes to the Canada Revenue Agency. While its CEO Stephen Jones said the debt won’t impact the carrier’s operations, the company is putting expansion plans on hold until further notice.
There’s a whole graveyard filled with the ghosts of Canadian discount airlines past — from Zoom Airlines to Roots Air to Jetsgo — prompting questions about why discount airlines have such difficulties sustaining in Canada, and what options are left for consumers who want to fly for cheap.
Discount airfare saddled with third-party fees
“For a few months now, there has been a little bit of a death watch within the airline industry as to which of the new entrants would eventually succumb to financial pressures,” said Duncan Dee, former chief operating officer at Air Canada.
He pointed to comments made earlier this year by Porter Airlines CEO Michael Deluce, who predicted that one of Canada’s new, ultra low-cost carriers would disappear within a few months because of the Canadian travel market’s small size in a competitive industry.
Dee said that environment played the biggest role in Lynx’s demise, because it “entered the market, really, with one hand tied behind its back.”
While discount carriers in the U.S., Europe and Asia use “bargain basement fares” to stimulate new travel among customers who wouldn’t normally fly — like offering a flight from London to Edinburgh for a cool $9 — Canadian travellers are subject to third-party fees that bloat the cost of airfare.
That’s partly because Canada’s airports, as not-for-profits, rely on what are called airport improvement fees to generate revenue. For example, the WestJet website notes a “departure tax,” which it says it collects “on behalf of airport authorities and various government agencies.”
Some airports charge $40 or more in added fees — and that doesn’t include other suppliers who add security charges, air-navigation charges and fuel surcharges, Dee said. By contrast, the U.S. enforces a $4.50 US cap on an airport fee called the passenger facility charge, according to the Federal Aviation Administration.
A new airline connecting Canadians to Europe via Iceland has started flying out of Hamilton International Airport. It offers fares at a significant discount from the major carriers, but will it make it in a market where other carriers have failed?
The added costs ultimately make it more difficult for homegrown discount airlines to stay competitive against international airlines, such as the Icelandic discount carrier Play Airlines, that offer flights from Canada to Europe and other destinations.
“If you take a look at what’s happening in Canada, ultra low-cost carriers don’t have the leeway to actually use such stimulative pricing to attract new customers,” said Dee.
“So … all they’re doing is they’re fighting for the exact same travel dollar that existing travellers are already spending on the large carriers.”
Higher fares ‘always in the cards’
Canada Jetlines — which provides charter flights to sports teams and companies, flies to sun destinations and leases its fleet to other carriers in the summertime — was originally conceived as an ultra low-cost carrier.
That business model was ultimately shelved, partly because the starting price for discount carriers in Canada “is composed of a lot of taxes,” and partly due to the challenges of competing with Air Canada and WestJet, said Canada Jetlines CEO Eddy Doyle.
But Doyle said he still thinks there’s “enough supply there to meet demand for the Canadian travelling public,” with Air Canada, WestJet and Air Transat back at full-strength following the disruptions prompted by the COVID-19 pandemic.
Kriti Bhardwaj, whose Lynx flight from Toronto to Los Angeles was suddenly cancelled when the airline announced it was shutting down, said she’s coming around to the idea of spending more on flights. She said she was rebooked with Air Canada at two or three times the cost of the original flight.
“I really don’t know if low-cost carriers can sustain,” she said, noting that Lynx’s shutdown follows Swoop’s absorption last year. “So probably, as a passenger or as a consumer, I’m willing to pay a little extra for a better experience.”
Passengers of Lynx Air at Toronto’s Pearson airport discussed their reactions to the low-cost airline’s announcement that it would cease operations on Monday.
“When you’ve got three carriers serving a market of about 40 million people, and policies which really discourage new entrants into the market, I think that it’s as good as it’s gonna get,” said Dee, the former Air Canada executive, “unless there are real changes to the underlying policies and regulations that keep the market the way they are.”
He said that unless another airline — an incumbent like WestJet or an entrant like Flair — serves the markets that Lynx is leaving, customers will be faced with more limited service.
The only way to guarantee lower fares is to increase competition, he added.
“When competitors either leave the market or disappear entirely like Lynx has, the inevitability of higher fares is always in the cards.”