Are the big players interested in buying smaller agencies? Well, it depends on who you ask.
This story originally ran in the June 28th, 2018 issue of Travelweek magazine. To get Travelweek delivered to your agency for free, subscribe here.
TORONTO — Expansion is already in the works at Swoop with announcements of new U.S. and international routes on the horizon for this summer.
It’s a sign of Swoop’s confidence in the Canadian market. Karen McIsaac, Senior Advisor, Communications and official spokesperson for Swoop, tells Travelweek: “It’s only a matter of time before we begin to offer new destinations. A big part of our target market are the five million Canadians who cross the U.S. border to fly with the ULCCs operating there. This summer we’ll be announcing some U.S. and international routes, which will be an important step towards repatriating that business.”
Swoop’s current fleet of two Boeing 737-800 aircraft will total six by year’s end, and then grow to 10 in 2019.
Much has been said about its low-cost model and affordable fares, but as an ultra low-cost carrier that sells direct to consumers, where does that leave travel agents?
McIsaac says there are still ways for agents to increase their revenue, despite not earning commissions on bookings.
“While we would never say never [to offering commissions], we also believe that the airfare is essentially the ‘hook’, or the enabler for a traveller. Priced right, people will vote with their feet and this is where travel agents offer significant value – on ground content. This is also where agents stand to make the most money as well,” she says.
Agent feedback about Swoop appears to be mixed, with some agents telling Travelweek that they’ll do what’s best for their clients, regardless of commissions, while others are still unsure about booking Swoop at all.
Carol-Ann Drummond, travel consultant at Vision Travel Solutions in Strathmore, AB, commented on Facebook that she would “book what the best option is for my clients. And if Swoop is flying to the destination with the best price, that option will be offered.”
However, Faith Sproule, owner at Niche Travel Group in Dartmouth, Nova Scotia, wrote: “We can’t book Swoop for our clients. As far as I know they are a direct to client airline, with no travel agent site.”
With no agent link to Swoop (agents must book through Swoop’s website at flyswoop.com), earning opportunities for agents can be found in charging a service fee to clients and/or packaging transfers, cruises, excursions, and other add-ons. It’s not ideal, but at the same time it’s not a surprising outcome either as ULCCs have historically been direct to consumer.
Industry experts say Swoop’s arrival is good for the Canadian economy and Canadian travellers. Andrew D’Amours, co-founder of Flytrippers.com, a travel website that spots and shares the best limited-time flight deals, says that having ULCCs in Canada is nothing short of revolutionary.
“ULCCs will democratize air travel and will make it cheaper for those who are willing to travel light and who don’t mind the no-frills approach to fly for a fraction of the price. Competition is always great for consumers, so perhaps eventually Canadians will be able to travel more within their country without paying sky-high airfares. And even if they use ULCCs to fly to the U.S. or elsewhere, all the money they save on travel can be reinvested here in our economy,” he tells Travelweek.
If the ULCC model makes so much sense for the economy, why then has it taken so long for it to take off in Canada? It’s certainly not for lack of trying; prior to Swoop and Flair, Canada saw several failed attempts, from Jetsgo to Greyhound Air to Roots Air.
D’Amours cites four main reasons: 1) Financing such a startup was made difficult due to foreign ownership rules (now relaxed by the federal government); 2) Existing carriers had such a stranglehold on the market; 3) Taxes and fees are famously more expensive in Canada than elsewhere in the world; and 4) Canada’s low population density can make it difficult for any startup find a customer base.
But as ULCCs switched lanes into the mainstream, the concept of no-frills flying eventually took hold in Canada, so much so that a wave of low-cost and ultra low-cost carriers announced entry into the Canadian market at around the same time.
“The true ULCC model wasn’t as widely accepted and available outside of Europe until very recently. ULCCs now represent over a third of the global aviation market and is no longer a niche business model,” adds D’Amours. “With the success of ULCCs in the U.S. and their exponential growth in the past few years, the timing was just right for ULCCs to launch here too.”
In Canada, in addition to Swoop, there’s Flair Airlines, already in operation with several gateways across Canada, and possibly Canada Jetlines, expected to announce an official launch date in the coming weeks. And most recently, low-cost carrier Norwegian Air confirmed on June 21 that it will offer routes out of Montreal (to Guadeloupe and Martinique) starting in fall 2018 and out of Hamilton (to Dublin) starting in spring 2019.
Swoop’s McIsaac says that the choice that ULCCs offer travellers is what ultimately led to their popularity. “What is clear today is that Canadians like choice and many are crossing the border to take advantage of the ULCC model, which makes right now the opportune time.”
So now the question has shifted, from ‘when will Canada get ULCCs’, to ‘how can Canada support so many of them’.
“It has been proven in literally every single market where ULCCs have launched that they will create new demand, without a doubt,” says D’Amours. “The sudden influx of new entrants and competition is great for travellers but also great for the Canadian aviation market. More people will be able to fly if airfares go down, which they undeniably will. I am very confident that the Canadian aviation market will grow in large part to ULCCs in the coming years.”
McIsaac doesn’t seem all that worried about competition either, saying that it actually confirms that Canadians are ready for this model. “Ultimately, competition is a good thing for Canadians. There’s room for some competition in the market and we’re confident that once people fly Swoop, they’ll want to do so again and again.”
Until now, Swoop has followed the standard ULCC model for success. Its initial network includes the cities of Abbotsford, Hamilton, Edmonton, Winnipeg and Halifax, with fares approximately 30-40% lower than those of a national carrier. Initial one-way flights start at $49, tax included, from Abbotsford to Winnipeg, $129 between Hamilton and Abbotsford, and $99 between Hamilton and Halifax.
“Swoop’s completely unbundled offering will allow these travellers to pay for what they want, and nothing that they don’t, which gives Swoop the ability to offer fares that are even lower while still turning a profit,” she adds. “In addition, this is a great opportunity to operate out of secondary airports, which also helps to keep our costs low.”
Only time will tell if Swoop will succeed where others have failed. But if early signs are any indication, it’s looking like clear skies ahead.