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Canadian low-cost carrier CanJet announced Tuesday that it would suspend all of its commercial service after Sept. 10. The airline, which had grown to become Canada’s third largest, blamed high fuel costs, stiff competition and rising airport landing fees, Reuters reports. CanJet says it still will operate charter services, but the company’s decision to end scheduled commercial flights “stunned” the industry, the Canadian Press (CP) says. "There was no hint of this," says Rick Erickson, a Calgary-based airline analyst. CanJet expanded rapidly since its current incarnation was born out of the Canada 3000 bankruptcy four years ago, according to the CP. But Erickson told the news agency that he thinks CanJet’s viability as a commercial airline may have been hampered by its reliance on in its main routes in its Atlantic Canada base.
In addition to Canada losing its third-largest domestic airline (after Air Canada and WestJet) that means there are now exactly zero low cost carriers operating on the New York-Toronto route. Jetsgo went bankrupt in May 2005, WestJet pulled out of LaGuardia in July of that same year, and now CanJet is shuttering its scheduled service.
That means the market has been left to the network carriers, and we know what that means. Let me give you a hint: In December 2005, Air Canada's "Tango" fare for a Friday morning, post-Christmas flight between YYZ-LGA was US$124. Today, that same fare class for the same flight is US$194, a 36% increase.
The price of crude, incidentally, has increased roughly 15% since December 2005.
Update: A friend of mine pointed out that the price of jet fuel has actually increased 35% between the end of November '05 and the end of July '06, so there's clearly a strong case that the network carriers are only pricing in the cost of fuel.
I'll concede this fact, irritating though it is to do so.
Both CanJet and Jetsgo undercut Air Canada significantly when they operated on the New York-Toronto route; CanJet's prices for the upcoming Christmas holidays were around 45% cheaper. Now, clearly they were doing something wrong as they both went out of business, but the failure can't be isolated to their New York-Toronto route. WestJet's fares were never as cheap, but, as a major, established, and profitable competitor to Air Canada, AC took them seriously enough to sharpen their pencils. This had a ripple effect on the other network carriers on the route.
Bottom line? The lack of low-fare competition on what appears to be a pretty good short-haul route isn't going to help leisure travelers this December. Jet fuel prices be damned.
