Jetlines lays out flight plan for more service in Western Canada

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Canada Jetlines Ltd. is aiming to launch jet service in the West in the summer of 2015 as it seeks to lure consumers away from planes with propellers.

Vancouver-based Jetlines will target domestic routes where turboprops are flown, vowing to avoid competing head-to-head against Air Canada and WestJet Airlines Ltd. on flights where they offer jet service. The upstart discount carrier, which is slated to launch in July, believes the incumbent airlines have given short shrift to consumers on regional routes.

Jetlines has set a goal of raising $50-million to get the fledgling airline closer to kicking off service with two leased Boeing 737 jets. In 2016, there will be eight jets in the fleet and by mid-2018, a total of 16 planes are planned, according to the preliminary prospectus by Jetlines and Inovent Capital Inc. The two companies plan to merge and list publicly on the TSX Venture Exchange under the name Jetlines and ticker symbol JLX.

Jetlines' multifaceted plan to make a splash in Western Canada boils down to persuading passengers to beware the propeller and instead have them fly on jets on discounted ticket prices – promising to undercut the country's two largest carriers by 30 per cent to 40 per cent on base fares. Calgary-based WestJet relies on Bombardier Q400 turboprops for its regional Encore service, while Montreal-based Air Canada deploys Q400s and other turboprops on many short-haul routes through partnerships with Sky Regional and Jazz.

Calling itself an ultra low-cost carrier, Jetlines has drafted a shortlist of Western Canadian cities, though it won't make the final route selections known until closer to the launch date because it doesn't want to give its two larger competitors too much lead time to plot their counteroffensive moves.

"Passengers would prefer a jet service," Jetlines said in the 270-page prospectus.

Air Canada and WestJet have said that they are well-positioned to react and compete against both Jetlines and another upstart, Jet Naked, that hopes to get off the ground in 2015. Calgary-based Jet Naked's executive chairman is Tim Morgan, the chief executive officer at charter carrier Enerjet and a WestJet co-founder.

Jetlines originally sought to acquire Airbus A319s and A320s, but has switched its fleet strategy to Boeing 737s. "Jetlines plans to enter into leases for its initial two Boeing 737 Classic aircraft to begin revenue flights in mid-2015," the prospectus said. The upstart also discloses that its fleet will have seven Boeing 737 Classics and nine Boeing 737 Next Generation jets.

Forecasts of lower jet-fuel prices in 2015 have helped lift Jetlines' confidence. In December, Jetlines announced that it has signed a binding agreement with Boeing Co. to acquire five Boeing 737 Max jets starting in 2021, part of an order for up to 21 of the aircraft as the new carrier plots years in advance for a transition to more fuel-efficient planes.

"Jetlines initially intends to have a starburst pattern out of Vancouver to Western Canadian cities and beyond," according to the prospectus for the share offering led by AltaCorp Capital Inc. and Euro Pacific Canada Inc.

Eventually, Central Canada could be on the route map. Jetlines also has aspirations to expand by offering flights from Canada to the United States, Mexico and the Caribbean. In the case of Canada-U.S. flights, Jetlines is willing to compete against jet service because it believes cheaper fares will win back some of the Canadians who drive to U.S. border airports to fly to American destinations, said Jetlines chief executive officer Jim Scott.

Industry analysts have a cautious view towards Jetlines, especially with WestJet Encore and Air Canada's leisure Rouge unit already attracting budget-minded travellers. "The path is narrow in our opinion," BMO Nesbitt Burns Inc. analyst Fadi Chamoun said in a research note. "If funding is achieved, the second hurdle for Jetlines will be the response from the incumbents, which have clearly been setting themselves up to compete more effectively at the low end of the fare market."

There is also a history of failed Canadian airlines that stretched themselves too thin – Canada 3000 and Roots Air folded in 2001, Jetsgo Corp. closed in 2005 and Harmony Airways shut down in 2007.

Sid Fattedad, a former executive at Canadian Airlines International serves as chairman of Jetlines' eight-member board of directors.

Jetlines president David Solloway pointed out in an interview that five months before Toronto-based Porter Airlines Inc. launched service in 2006, WestJet chairman and co-founder Clive Beddoe poked fun at Porter's plans to operate Q400 turboprops. Mr. Beddoe said in May, 2006: "No matter how good the turboprop, people don't like them. Those things spinning around at thousands of revolutions per minute just past your nose just scares the bejesus out of people. They don't go high enough, they don't go fast enough."

Mr. Solloway noted that WestJet's Encore operation has been using Q400s as workhorses since that regional unit started in June of 2013.

Jetlines intends to steer clear of Calgary, where WestJet is strong, but destinations in Saskatchewan and Manitoba are possibilities. The Jetlines executives are scrutinizing "point-to-point" flying, such as going between Vancouver and a small Prairie city without any stopovers.