Why Swoop failed to take off in Canada — and what it could mean for ultra low-cost flying

Lukewarm market stimulation and high costs brought WestJet to fold Swoop into its operations, the airline’s CEO said: ‘Super low fares are very, very difficult to operate on’

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When Swoop was launched into the ultralow-cost carrier market in 2018, Rick Erickson was skeptical there was a business case for such an airline in Canada.

“I was thinking that it would be difficult — very difficult — for a ULCC to get going in Canada,” the Calgary airline consultant said.

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Calgary-based Swoop’s five-year experiment ended last weekend when WestJet, the company’s owner, announced it had absorbed the airline’s fleet into its own.

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Its demise was not the result of catastrophic failure, airline experts say, but likely a strategic decision by WestJet due to the high cost of flying out of most Canadian airports along with recent collective bargaining with its pilots.

Swoop’s retreat comes at a time when airlines offering basement airfares seems to have a narrow foothold, Erickson said, as three more players have entered the ultralow-cost arena since Swoop came on the scene.

WestJet CEO Alexis von Hoensbroech
WestJet CEO Alexis von Hoensbroech speaks at a Calgary Chamber of Commerce event on Wednesday, April 12, 2023. Azin Ghaffari/Postmedia file

‘The amount of stimulation you can do is actually pretty limited’: WestJet CEO

Swoop’s 2018 arrival was both WestJet’s competitive response to Air Canada Rouge and an attempt at scaring off other potential ULCCs, Erickson said. Starting with two Boeing 737-800s, it announced it would expand to 10 by 2019. When it added six more in February 2022, the company said the expansion was evidence of its business plan “paying off.”

“WestJet felt that if it’s good enough for Air Canada, it’s good enough for WestJet,” said John Gradek, a lecturer at McGill University who studies the airline industry.

WestJet CEO Alexis von Hoensbroech, who joined the company in February 2022, said the airline started Swoop to “test the ULCC market in Canada.”

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Growing in a country that serves only a handful of major cities and population centres — and doing so without taking a significant financial hit — proved difficult, von Hoensbroech said.

The former European airline executive said incentivizing Canadians to change their travel habits through low prices was more challenging than in Europe, where ULCCs stimulate demand by offering flights cheaper than other transportation, such as trains.

“The biggest difference . . . between what I know from Europe and what we see in Canada (is) that the amount of simulation that you can do is actually pretty limited,” he said.

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“Super low fares are very, very difficult to operate on, and in a way that you can also run a sustainable business,” he added. “It was actually interesting to see this is by far not as strong as we would know from other jurisdictions.”

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Even at smaller airports that are cheaper to fly out of, stimulating demand was a challenge. “There are limits to how many passengers you can get through those airports,” von Hoensbroech said.

Adding in high administrative costs of flying through many Canadian airports, being able to stomach high expenses is a necessity for ULCCs. “It’s always good to have a business plan . . . but it’s always, always, always the deep pockets,” Erickson said.

Swoop navigated high number of complaints, competition watchdog investigation

Swoop also struggled with passenger complaints. It had 14 complaints per 100 flights between April 2022 and June 2023, the third highest among Canadian airlines, according to Canadian Transportation Agency data. Only Flair Airlines (14.9) and Sunwing Airlines (14.0), which WestJet took over in the spring, had worse records. Next-worst was WestJet, though far behind at 6.4.

A small fleet of planes creates issues with covering delays or cancellations, and adds a higher of risk of customer complaints, Gradek said, which WestJet will be better able to avoid with the 16 planes it absorbs from Swoop.

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Swoop was also the subject of an investigation by Canada’s competition watchdog in 2018 over predatory pricing allegations — selling tickets for less than it costs to run a flight as a way of deterring competitors from entering or expanding.

In a statement to Postmedia, the federal Competition Bureau said its investigation into WestJet and Swoop has been discontinued. The bureau also said it would be inappropriate to comment on its reasons for closing the investigation.

WestJet pilots
Capt. Tim Perry, ALPA Canada president, left, and Capt. Bernard Legal, chair of WestJet Master Executive Council, were photographed while a large group of WestJet pilots hold a picket outside WestJet campus in Calgary on Friday, March 31, 2023. Azin Ghaffari/Postmedia file

Pilot agreement may have been key factor in demise: expert

This summer’s last-minute agreement that will see WestJet pilots receive a 24 per cent raise over four years was likely the key to Swoop’s retreat. The deal also stipulated the merger of WestJet and Swoop, requiring that pilots from both airlines be brought onto a level pay scale.

“I think the demise was partly related to the collective agreement that got signed,” Erickson said. “Any time you have another airline within an airline, there’s always conflict between the labour groups because one group is being paid less.”

WestJet has since been pushing plans to densify the rear sections of its 737 aircraft while offering premium seating up front. The back seats will be offered at ULCC prices, von Hoensbroech said.

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“We have taken our conclusion of what’s best for us,” von Hoensbroech said.

What’s the future of cheap airfare in Canada?

As Swoop disappears, Flair Airlines, Lynx Air and Canada Jetlines remain as the country’s largest ultra-low-cost airlines.

Before Swoop left the market, Gradek had predicted one of the four to close shop by winter 2024. The jury’s now out on what happens next, he said.

The remaining airlines have communicated lofty ambitions. Earlier this year Flair recanted its growth expectations, saying it no longer plans to have 50 aircraft in Canada by 2025, saying it now aims to hit that mark in 2027. Meanwhile, Lynx says it plans to have a 46-strong fleet by 2028.

“Can the Canadian market support all those airplanes? The answer is, of course not,” Gradek said.

Some are pessimistic about the Canadian market’s ability to keep any low-cost airlines afloat.

“It’s one of the toughest markets in the world to get a foothold in and survive. It’s a classic two-airline market,” said John Grant, a senior analyst at OAG, a travel data provider. Scaling up operations quickly in Canada, where shoulder seasons tend to hurt airlines, means owners have to “start with billions to end up with millions.”

Yet the features of low-cost flying — primarily when it comes to paying for services such as overhead luggage — have become more mainstream in Canada, Erickson said. Still, he said, building a sustainable airline is the primary challenge.

“What is hard is to have the deep pockets to last.”

[email protected]

X: @mattscace67

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