WINNIPEG — The latest report from the Conference Board of Canada says this country’s airline industry is flying high but at least one carrier has hit a rough patch.
The Consumer Association of Canada has issued a travel alert for NewLeaf Travel Company and Flair Airlines, saying Canadians “have recently been forced to deal with arbitrary cancellations and alterations to flight dates and times on thousands of tickets” purchased from NewLeaf Travel Company Inc. on flights operated by Flair Airlines Inc.
The group added that it is extremely important that prospective buyers of NewLeaf tickets have an alternative plan to reach their chosen destinations and return home on time.
“Buyers of NewLeaf tickets should be asking themselves the question ‘Does the saving of buying cheap tickets warrant the risk of being stranded’.”
Back in November NewLeaf announced a U.S. sun program with direct flights from Hamilton International Airport to Orlando Melbourne International Airport as well as three times weekly service from Calgary and once weekly service from Edmonton to Phoenix-Mesa Gateway Airport.
Days later WestJet announced new service to Phoenix-Mesa Gateway Airport from Calgary and Edmonton. In January NewLeaf said it was cancelling plans to offer flights between Alberta and Phoenix-Mesa, and also that it was postponing its service to Florida from Hamilton.
Meanwhile in its latest Canadian Industrial Outlook: Canada’s Air Transportation Industry, the Conference Board of Canada says ideal conditions continue to fuel strong profitability for Canadian airlines this year. However growth is expected to be more subdued going forward as temporary factors that have recently boosted industry demand slowly dissipate, says the report.
“The outlook for Canada’s air transportation industry will remain strong in 2017, but some of the main tailwinds that benefited the industry over the past two years, primarily low fuel costs and the weaker loonie, will slowly reverse starting this year,” says Todd Crawford, Principal Economist at the Conference Board. “However, this reversal will not be severe enough to threaten the industry’s profitability and demand for the industry’s services will continue to grow.”
Higher oil prices will lift the cost of jet fuel and weigh on industry profitability over the forecast, while the low-flying loonie will continue to make Canada a cheaper destination for both foreign and domestic travel.
Canada’s airline industry’s pre-tax profits are expected to reach $1.5 billion in 2017, says the report.
“With fuel prices accounting for as much as 30% of industry costs, the dramatic drop in oil prices in past years had a positive impact on airlines’ bottom line. However, the benefits are expected to begin to trail off over the next two years as fuel prices are forecast to rise, driving up industry costs. Oil prices have already risen significantly from their lows and are projected to average US$54 in 2017, up from US$43 last year.”
Despite generally weak economic conditions last year, Canadian airlines experienced the strongest demand on record in 2016, according to the report.
“The threat of new low-cost carriers will keep price increases subdued for the next five years, but even modest gains would be an improvement over the falling prices seen in the past two and half years. Following a drop of 3% in 2016, prices are expected to rise by 0.5 per cent this year.”
Overall Canada’s air transportation industry pre-tax profits are expected to grow another 2.4% in 2017 to reach $1.5 billion.
WestJet’s 2016 results, released today today, show a full-year profit drop of 19.6% from 2015. The airline’s net income for the 12 months that ended Dec. 31 was $295.5 million, down from $367.5 million in 2015. Last year’s fourth-quarter net income was down 12.9%, falling to $55.2 million from $63.4 million a year earlier.
Annual revenue increased 2.32% to $4.12 billion and fourth-quarter revenue was up 6.2% to $1.02 billion, while operating expenses were up 6.4% for the year and 10.2% for the quarter. Annual revenue was up from $4.03 billion in 2015, and $958.7 million in that year’s fourth quarter.