Running head: Low Cost Carriers: An Assessment of the Demand for Low Cost 1

Carriers (LCCs) in the Canadian Market

Low Cost Carriers: An Assessment of the Demand or Low Cost Carriers (LCCs) in the Canadian Market

Ali Basmaci

Embry-Riddle Aeronautical University

Running head: Low Cost Carriers: An Assessment of the Demand for Low Cost 2
Carriers (LCCs) in the Canadian Market

Author Note

Until the National Transportation Act, 1987 (NTA) came into force, the airline industry had been closely
regulated by the federal government. Earlier efforts to deregulate, the air transport and foster a more
competitive environment during the 1970s came with the creation of the Air Canada Act, 1977 and the
government’s removal of route restrictions. The NTA put greater dependence on market forces to
enhance competition and provide more efficient and cost-effective transportation services to shippers and
travellers (Air Canada, 2015).

Despite the government’s efforts and the rising demand of air travel within Canada there remain many
hurdles for the industry. Of primary concern is the current price of domestic air travel within Canada. It
remains, in some cases, prohibitively expensive. Canada’s average price per 100 km is a staggering
$23.90 (Kiwi, 2017). Several Asian and European countries have an average price per 100 km of less
than 10 dollars and the United States sits at $11.50

Unlike Europe and the United States, there is less competition within Canada, especially within the Low
Cost Carrier (LCC) market. Given its geographic extent, Canada has a very small population and
therefore cannot sustain as many airlines as witnessed within Asia, Europe and the United States. The
resulting low levels of firms render prices stagnant at uncompetitive levels. Furthermore, until very
recently there existed no Low Cost Carriers within Canada. The emergence however, of LCCs such as
Swoop and Flair Airlines, if successful will stimulate demand by driving prices down.

LCCs, unlike Full Service Carriers (FSCs) are predominately concerned with their cost structure and the
generation ancillary revenues. LCCs typically operate a single type fleet into secondary or sometimes
tertiary airports. This is all in an effort to curb maintenance and training costs and maximize operating
revenues (ICAO, 2017).

A barrier to the growth of LCCs within Canada has been the government’s previous reluctance to amend
the Canada Transportation Act’s provision to limit foreign ownership to 25%. Companies such as
Jetlines and Enerjet have been granted lets, but have yet to commence operations. Swoop, with the one
hundred percent backing of WestJet, a Canadian based airline, launched domestically in 2017 and
subsequently expanded to the United States with season routes. Swoop however, has a small market
share, operating only six aircraft but maintains the LCC market within Canada can support a fleet of thirty
to forty aircraft.

The upcoming research paper will examine the history of the Canadian air transport market from
deregulation to present day. It will further examine the current players within the market along with the
emergence of LCCs. A brief description of the LCC model will be included and precede a discussion
regarding the demand of LCCs within the Canadian market. A brief outline of the proposed paper follows
on the next page.

Refernces
Air Canada. (2015). The Aviation Indsutry as an Economic Enabler. Air Canada.
ICAO. (2017). Airline Operating Costs and Productivity. ICAO.
Kiwi. (2017). Flight Price Index 2018. Retrieved June 12, 2019, from
https://www.kiwi.com/stories/flight-price-index-2017/usd/
Running head: Low Cost Carriers: An Assessment of the Demand for Low Cost 3
Carriers (LCCs) in the Canadian Market

Abstract
Table of Contents
1. Introduction
a. Modern History of Canadian Aviation
i. Deregulation
ii. Current Market State
iii. Emergence of LCCs
2. Airline Business Models
a. Full Service Carriers
i. Air Canada
ii. West Jet
iii. Air Transat
b. Low Cost Carriers
i. Flair
ii. Swoop
c. Hybrid Business Models
3. LCC Model
a. Overview
b. Operational Characteristics
i. Generic Strategy
ii. Scale
iii. Operational Model
iv. Market
v. Inventory Management
4. Factors Affecting Airline Demand
a. Geo-Economic Determinants
b. Cost
i. Components of Airfare in Canada
5. Presence in Canada
a. Challenges and Past Failures
b. Opportunities
c. Future
6. Conclusion