The Fast-Growing Canadian Low-Cost Carrier Market

DALLAS - As the world slowly shakes off covid restrictions, more and more people are looking to get back into travelling. However, with rising fuel prices and a global economic downturn, travel is starting to get out of reach of most Canadians.

Over the last couple of years, Canadians have had a new option when it comes to air travel: Low-cost carriers (LCCs). Also known as "budget airlines," these LCCS offer low-price fares and "no frills" air travel.

The LCC market was already well-established in many parts of the world. When the market came to Canada, it hit the ground running and quickly gained traction as the new way to travel by air. With a country as large as Canada, coast-to-coast flights can mean several hours in the air, not to mention the extremely high fares with legacy carriers.

The newest Canadian low cost carrier, Canadian Jetlines. Photo: Brandon Siska/Airways

Many Choices, Limited Destinations

When choosing a Canadian LCC to fly with, choices are plentiful. Airlines such as Flair Airlines (F8), Swoop (WO), Lynx Air (Y9) and Canada Jetlines (AU) serve the country from coast to coast. The offerings remain, in general, the same across the board. However, each has its particular niche in the market.

For instance, carriers F8, WO, and Sunwing (WG) have cornered the market on sun destinations. More popular with Canadians in the winter months, these airlines have capitalized on serving these routes from smaller markets. While sun destinations are the key offering during the winter, domestic travel in Canada picks up during the summer. This is another important market all Canadian LCCS capitalize on. However, the domestic market remains a little stagnant.

These airlines also serve a vital role in making air travel accessible to all Canadians, especially in a post-COVID-19 world. The pandemic brought air travel to an abrupt halt, with all Canadian carriers significantly reducing capacity. Some airports even saw service suspended altogether. Some services still need to return.

Reduced frequencies and shifts in the global economy meant market gaps, and airplanes were now available, the perfect recipe for LCCs. These carriers sometimes even completely replaced frequencies once flown exclusively by legacy airlines. This positive change led Canadian LCCs to cement their place in the market.

Swoop Airlines Boeing 737-800 Photo: Liam Funnell/Airways.

The Low-Cost Model

The low-cost model (traditionally) has come with a few key features. In Canada, the most common similarity is flight frequency. While a traditional legacy carrier may serve a particular destination daily, LCCs may only service a destination a few times per week. For example, AU has recently launched a new direct link between Toronto (YYZ) and Vancouver (YVR). But it only operates twice a week.

In-flight service is also where the LCCs tend to align. Legacy airlines may include a complimentary drink or meal service in the ticket price. These items on LCCs are usually available via a buy-on-board program.

The same goes for services such as baggage. While checked bags are an extra cost on most Canadian carriers, LCCs even go one step further to limit passengers to just a single personal item included in the base fare. Flair, for example, offers a "bundle" system that allows passengers to bundle carry-on and checked baggage. This is a common system used amongst these airlines.

LCCs also tend to fly what is referred to in the industry as a "point-to-point" model. This is used to fly passengers directly to their final destination from what would be considered a "smaller market." Legacy carriers are more inclined to use a "hub-and-spoke" model, where smaller destinations are filtered into a larger airport where passengers can connect to their final destination. The fact that most LCCs use a point-to-point system makes the majority not allow connections when booking.

One selling point of LCCs is that they typically have newer fleets. Y9, for example, operates five Boeing 737-8 aircraft with an average age of 2.8 years. F8 also has a young fleet of 737-8s and 737-800s with an average age of just 4.2 years old. Meanwhile, Y9 currently flies six 737-8s and has a further 51 on order.

Why would an LCC want to operate newer aircraft? Typically the stigma is that the latest aircraft are associated with the highest aircraft cost. The significant factor, however, is not purchase but operating cost. The newest aircraft tend to be the most fuel-efficient, which is the most considerable expense on average for any airline. It is this fact that a new aircraft is the most attractive to any low-cost carrier.