Can an ultra-low cost airline work in Canada?

With Canada Jetlines’ plans to raise $10 million and list on the TSX Venture Exchange, Canada could be one step closer to getting the country's first ultra-low cost airline.

The Vancouver-based discount carrier is hoping to entice flyers with fares 40 per cent cheaper than Air Canada and WestJet, Jetlines President Dave Solloway said in an interview with the Financial Post.

But if Jetlines plans to follow through with a European-style discount model, passengers can expect to dish out for the extras including meals, drinks and luggage space.

“When you look at the operation of these types of airlines, what they’re going to do from a route network perspective will be interesting,” AltaCorp Capital analyst Chris Murray told Yahoo Canada Finance.

The big questions, he says, revolves around what cities the Jetlines will fly to and from as European ultra-low cost airlines have a tendency to operate out of tertiary airports just outside the big cities.

“Even way back when WestJet first started coming to Eastern Canada, they were operating out of Hamilton as opposed to Toronto just to try to keep their costs down,” says Murray.

“That would be the kind of thing that you would expect from (Jetlines) – it’s not necessarily going to be a point-to-point service.”

For that reason Murray suspects Jetlines will be more likely to compete with WestJet Encore, Air Canada’s regional flights and, if the company pushes into eastern Canada, Porter.

But the glaring difference between cheap flights in Europe and starting a budget airline in Canada is the higher level of taxes and fees here.

“Take one of those flights to northern Ontario, it’ll be $100 one way but frankly,
$40 to $45 of that is going to be fees and taxes,” says Murray. “It can be really cheap but you're still stuck with some of the structural issues around operating in Canada.”