Low-cost travel

With airfares here twice as high as Europe, new low-cost carriers see a chance

CALGARY — It’s not surprising that at least two companies feel there is room for ultra low cost carriers in Canada.

According to a recent study of airfares within Europe and within and from Canada, prices in Europe are about half for comparable flights.

Vancouver-based Canada Jetlines and Calgary-based Jet Naked are raising money because they feel a low-cost model can work in this country.

Mark Milke, a Senior Fellow from The Fraser Institute writing for TroyMedia.com, compares Canadian airfares to what Europeans pay.

“Booking three weeks in advance, using the travel website Kayak.com (and others to calculate fees and taxes, travel distances, and currency conversions to the Canadian dollar), the results are as follows:

“For five return flights in Canada this summer (Calgary-Victoria, Toronto-Ottawa, Halifax-Montreal, Vancouver-Kelowna and Winnipeg-Regina) totalling 5,367 kilometres, your total bill is $1,357.73 or 25 cents per kilometre.

“In contrast, five in-country flights in Europe (London-Edinburgh, Paris-Nice, Milan-Rome, Dusseldorf-Munich, Barcelona-Madrid) totalling 5,358 kilometres would cost you a $723.79, or 14 cents per kilometre, almost half the cost of the Canadian flights.”

He said one might think that taxes and fees explain the difference between Canada’s higher five-city airfare bill and Europe. “Except taxes and fees in Canada account for 32% of the $1,357 five-fare bill; in Europe, taxes and fees account for 49% of the $723 cost.”

He also compared cross-border flights between Canada and the United States and then across Europe.

“If you fly Toronto-Chicago, Vancouver-San Francisco, Calgary-Denver, Winnipeg-Minneapolis and Montreal-New York, the total bill for 9,660 kilometres is $2,004.82, or 21 cents per kilometre (with taxes and fees at 32%).

“Five cross-border flights in Europe with a total return distance of 9,995 kilometres (Munich-Rome, Dublin-Berlin, Vienna-Athens, Prague-Barcelona, London-Paris) comes to $1,348.68 or 13 cents per kilometre. In this case, taxes and fees comprise 35% of the bill.”

Milke credits Europe for having the world’s most open airline markets. “That means robust competition which puts downward pressure on fares, facts also noted by the European Union and the OECD, both of which praise liberalization of the world’s airline markets.”

Because any airline in any European Union country can fly into any other EU and even fly domestic flights in any other EU country, an array of new, low-cost carriers entered the market brining a 34% reduction in real terms in ticket prices, a 220% increase in cross-border routes between 1992 and 2009, a 310% increase in the number of cities served by more than two carriers during the same period, a doubling of air travel within the EU, an economic boost and increased employment in the airline business and related sectors.

In North America foreign carriers cannot fly domestic flights in Canada and the U.S. leading to higher prices, says Milke, and a couple of entrepreneurs who see an opportunity to succeed where many have failed (Canada 3000, Zoom, Jetsgo, Harmony, Skyservice, etc.).