Can these new airlines bring Canada’s sky-high fares back to earth?

Canada ranks among the world’s most expensive countries to fly in, due in part to high airport and security fees and limited competition, and service is meager in many small and midsize cities. More than 60% of Canada’s 36m people live within 100 miles of the border, and many head south to fly; about 5m cross the border each year for cheaper flights. “Griping about the cost of air travel in this country is as endemic as bitching about the weather—it’s as if nothing can be done about either of them,” a columnist for Canada’s National Post wrote in June. Some cheaper fares may be en route. Three companies are working to bring the ultralow-cost model to the country, where air travel is dominated by two national airlines, Air Canada and WestJet. But higher operating costs make it hard for new airlines to survive, and the dominant airlines are sure to respond to upstarts offering lower fares. Canada is one of just two nations in the Group of 20 largest economies without any ultralow-cost carriers. Canada also charges higher security fees than most other nations. Canadians are eager for the expanded service and lower fares that ULCCs could provide, said Jim Young, CE of NewLeaf Travel Co., a “virtual” airline in its sixth week of operations, with three Boeing 737s flying to secondary airports in 11 cities nationwide. NewLeaf itself has no air certificates or airplanes. It sells tickets on an established carrier, Flair Airlines—a “wet lease” arrangement that lets NewLeaf escape many of the costly aspects of being an airline. Executives at all three of Canada’s fledgling ULCCs say they aim to underprice Air Canada and WestJet by 25 to 35%. Enerjet is a charter operator that flies oil-and-gas field workers in northern Alberta and does contract work for Air Transat, another Canadian charter carrier. Now it is shifting to the ultra-low-cost model1. Enerjet has been “hunkered down” for more than a year amid the collapse in oil prices and western Canada’s depressed economy, said Darcy Morgan, the company’s chief commercial officer; his brother Tim, a WestJet co-founder, is its CEO. The company leases three Boeing 737-700s and wants to begin a new ULCC tentatively called Flytoo. (It was first called Jet Naked2 for its knack for drawing publicity, but that name was abandoned.) Enerjet is working to raise C$80m and hopes to begin Flytoo service by year’s end.<br/>