Airlines gear up fare wars
Jetsgo expands in west: WestJet leads price chopping in bid to protect share
Chris Sorensen
Financial Post
Wednesday, March 02, 2005
Travel agents say their customers are reaping the rewards of the battle to control Canada's skies.
That is particularly the case in Western Canada, which is set to become awash in commercial jet traffic this summer -- largely due to expanded service in the region by Jetsgo Corp.
Travel agents say Jetsgo's increased focus on the West, revealed late last week, has drawn an immediate response from Calgary-based WestJet Airlines Ltd., which has said it intends to protect its market share with aggressive fares.
"You can definitely see the drop in pricing in the last couple days," said Chris Shellard, who manages a travel agency in Vancouver. "I just booked someone to Calgary on WestJet 10 minutes ago. I think the fare was $58 each way.
"That's really cheap."
In fact, Jetsgo, Air Canada and WestJet all dropped their lowest fares from last week by about 20% on key routes, with even bigger reductions occurring in Western Canada, according to a survey released yesterday by Desjardins Securities.
WestJet led the pack with a 24% reduction in fares on its busiest routes. It's currently advertising fares to Western Canadian cities that are as much as 57% cheaper than they were one week ago.
Examples of WestJet's fare reductions (one-way) include:
- Winnipeg-Calgary down 36% to $83 from $130;
- Vancouver-Calgary down 38% to $58 from $93;
- Vancouver-Edmonton down 57% to $79 from $184.
"It was quite surprising," said Nadi Tadros, a Desjardins analyst. "It could very well be in anticipation of Jetsgo's arrival."
Jetsgo, on a growth streak for the last three years, said beginning in mid-April it will add Regina to its network, expand capacity on existing Western Canadian routes and launch 12 daily flights between Vancouver and Calgary, one of WestJet's original routes when it launched in 1996.
Meanwhile, Air Canada is going ahead with a plan to shift more of its domestic business over to Jazz, its lower-cost regional carrier, while Halifax-based CanJet Airlines will soon begin flying between Toronto-Calgary and Toronto-Vancouver.
"With these kinds of things it usually means a price war," said Allison Eaton, a spokeswoman for Flight Centre, a travel agency with 110 locations in Canada.
But while that would be good news for consumers, it is rarely positive for the industry, which is also suffering from sky-high fuel prices. And nobody knows the pain better than WestJet.
The airline, which last month posted its first quarterly loss, received another blow yesterday when Ben Cherniavsky, a Raymond James analyst, downgraded his rating on WestJet's shares to "underperform." Mr. Cherniavsky is now one of three analysts who are recommending people stay away from WestJet's stock.
Shares of WestJet, which closed yesterday at $10.80, down 23 cents, on the Toronto Stock Exchange, have dropped more than 20% since the beginning of the year.
In a research note, Mr. Cherniavsky said what finally "tipped us into the bear camp" were higher fuel prices, increased competition in WestJet's backyard and the growing likelihood that privately held Jetsgo will not disappear before the busy summer travel season.
Jetsgo has denied rumours it is in financial trouble.
© National Post 2005
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