Building a vision for Air Services and Tourism Development in Canada. Why should Canada think differently this time?

Reality: A disconnect between national and regional level tourism development and an outbound travel focused strategy are not allowing the country to reach its full potential…

 From ‘Deer’s in the Headlights’ to Opportunistic Thinking…

 The pandemic has brought a whole new vision on how airlines look at Air Services Development (“ASD”). The days of planning more than 1-year ahead for new routes and connections are gone. Rather, we have seen the introduction of a new phenomenon - ‘route experimentation’ or trying a new route and review its financial performance as at least these are different days from the pre-pandemic ones. This new thinking means that airlines are building routes in a couple of months - from thinking and acting to selling, serving, and delivering a service.

 In 2021, we observed Bozeman Airport in Montana as one of the fastest growing airports. A similar story can be told with Palm Springs, why you may ask? Well, we were all looking for places that supplied a vision of tourism that was about open space, nature and, a feeling of getting away from others. Many were not looking for city tours per se, rather, looking for the wilderness and unknown. For example, in Europe, Lufthansa Group operated  4-to-5-hour flights half-way across the Atlantic to serve the Portuguese islands of Azores (Lufthansa from Frankfurt and Swiss Airlines from Geneva). 

 And, as we saw the introduction of ‘experiments’, we also saw the significant success of the low-cost carriers and ultra-low-cost carriers across many markets. In the US, Southwest, Spirit, Allegiant, Frontier and Sun Country were all expanding significantly, and, even two new low-cost players launched operations - Avelo and Breeze. Besides, Wizz Air and Ryanair also bucked into this trend, and significantly grew their presence in southern Europe as tourists were looking for remote area travel rather than, city-breaks.

 Route planning was mainly affected by the disappearance of global corporate travel in general, however the demand for VFR (visitors, friends, and relatives), followed by an increasing demand in leisure travel, saved air traffic and airlines in general. Whereas, the hub & spoke model, in some instances, was not ideal, as passengers avoided excessive connections, and preferred non-stop flights, from point A to B.

 Airlines discovered that seasonality of flights also has a good business case, as well adding capacity, on a point-to-point basis. What was discovered and forced here, was the fact that what was believed to be the ideal airline route network model, wasn’t ideal at all, in a pandemic. Flexibility, innovation, and adaptability are now key when looking at the future of air travel; experimenting with seasonal and ‘new and interesting’ routes and destinations.

 Route Experimentation and Canada

 So, with such in mind, let’s look over to Canada. Yes, lockdowns and the challenges of border closing with the US has put an inconvenient situation on the country and Canadian airports. In particular, during 2021, many Canadian airports had no flights.  But what we are seeing/showing for Summer 2022 is a completely different picture. The emergence of a strong low-cost sector pushed by Swoop and Flair, as well as new incumbents that are being discussed (Lynx and Jetliners).

 And, one may ask: What are the vision of these new players? From what we can observe, it is quite obvious - let’s fly Canadians within the country and abroad to destinations where, there is very little potential to bring passengers from these arriving countries back into Canada to expand the country tourism potential. Therefore, Canadian tourism authorities, at the national, regional, and local levels may have a mass of flights taking Canadians away from the country, but not, bringing valuable international passengers back. Why not focusing on both outbound, inbound, and intra-Canadian traffic? Is this not an opportunity lost?

 The Canadian point of sales outbound travel strategy is divided in two differing seasons: Winter - which is all about pushing winter-sun Mexico and Caribbean destinations, whilst in Summer, airlines redeploy equipment to Europe. With the exception of the national carrier, Air Canada, none of the Canadian carriers has a well-developed nor established point of sale, in international locations. Therefore, the strategy on the outbound flights seems quite familiar as in the old days. Mexico (Los Cabos and Cancun), Caribbean (Dominican Republic and Cuba) and Southwestern US (Palm Springs, Phoenix and Las Vegas) are the key planned destinations.

 Now, let’s review how these markets/regions fit with the international strategy of Canadian tourism. Do we have locals from the sun and beach destinations in Mexico and Caribbean coming to Canada for holiday? And, is Palm Springs, Vegas, and Phoenix, the cities that are of most interest in bringing American tourists to Canada? Probably, they are not.

 Never you hear the Canadian airline marketing teams focusing on inbound travel into Canada. And even, Air Canada built a business case to ‘steal’ US passengers going around the world, into Asia & Europe - using their third country connectivity air-rights - but, simply bypassing Canada as a destination, all together. In other words, fly by Canada, and not to Canada.

Where Might this Strategy be Heading to?

Well actually, we do have Canadian low-costs experimenting, and, trying new routes - thus pushing secondary Canadian airports (as well as primary ones) to have Canadian’s travel south; but we don’t observe an objective to bring the other side of the journey back to Canada, and, bring new tourists and its related expenditure into the country. It seems all the Canadian airlines share the same mindset - offering cheaper flights to Canadians to spend their Canadian dollars abroad.

 Such an approach has zero benefits for the Canadian tourism industry; however large or small such communities. In essence a new story needs to be created, hand in hand with both Canadian as well as international air carriers and follow through the creation of a truly global inbound strategy, one that can make Canada one of the top 10 countries in the world for tourism arrivals. Alignment between the national and regional government entities with the private sector is imperative if Canada wants to be successful.

Even though Canadians want to escape the harsh winters, others want to see it! We can market it across the globe for those who have never experienced the winter in their home countries. All ‘four seasons’ are fully marketable and full of experiential tourism opportunities, if clearly planned and designed as such. Overall, we can segment this opportunity in a very simplistic way, inbound to Canada from the much larger neighbour, the United States, in addition to then focusing on Europe and Asia as a true in-bound tourism strategy unfolds.

Therefore, if the growth of the low-cost carriers in Canada is taking Canadians south (as well as the legacy carriers), what about the vision of the US low-cost carriers? Are they focusing on bringing Americans to Canada? And, help to support a vision for inbound, regional Canadian tourism development. Overall, for Summer 2022, this is not the picture!

From Six to Nine low-cost players in the US - Growth is Exponential! But not in Canada!

 With such in mind, it is very interesting to look at the growth of the US low-cost airline development. In 2019, six carriers (classed as Low-cost, or Ultra low-cost) Allegiant, JetBlue, Frontier, Spirit, Southwest, and Sun Country had 248 million enplaned passengers. In 2020, during the pandemic, such players still enplaned 125 million passengers. Interestingly, as mentioned earlier, 2021 has also seen the addition of new carriers – Avelo, Aha and Breeze therefore we now have nine players in the US working a low-cost aviation vision.

So, how is Canada, at the airport and tourism level, working with these nine airlines to bring US tourists to Canada? This is in addition to the mega or legacy carriers in the USA, which serve main hubs in Canada, but more from a connectivity perspective, into their major US and global networks, American Airlines, Delta Airlines and United Airlines.

 Well, for Winter 2021/22 (November 2021 to end-March 2022), Canada is not seeing a single one of those nine LCC’s flying non-stop services to any Canadian airports. And, if we look beyond the winter period, and, focus on Summer 2022, Canada will have just three routes - Jet Blue connecting New York’s JKF and Boston airports with Vancouver, and Sun Country airlines with a Minneapolis to Vancouver service. So, from nine carriers that connect hundreds of cities, with thousands of flights a day within the US, from the US to Central and Latin America and, the Caribbean, on the US to Canada position, we have just three flights for Americans to purchase with a single low-cost player.

Besides and if we look deeper at the situation with the low-cost carriers from the US, they do try and sell inbound to Canada, just not flying to Canadian airports, rather, flying to airports on the US border. For example, Allegiant allows its passenger to book Toronto but the flight lands at Niagara IAG airport. Same goes for Vancouver (arrival at Bellingham airport), and Montreal (arrival at Plattsburgh). And it goes on, Spirit Airlines sells Niagara IAG airport (and says Toronto area!!!), and, Southwest, the third largest airline in the US by passenger numbers, flies to Bellingham and puts in brackets in its website - only 50 miles from Vancouver. In essence, we have two out of nine US low-cost carriers making just 3 routes from the US to Canada, and, three of the US low-cost carriers trying to sell Canada (but you must arrive first to a US airport…). Why?

Earlier we discussed the importance of looking at new ways of building route experimentation, escapism, and, how airlines are pushing the low-cost airline model. But, when we talk about inbound to Canada, something is not right. We need to highlight the fact that our airport business model is excessively expensive for both Canadian and foreign carriers, becoming a deterrent for any international low-cost or ultra-low-cost carrier, as they analyze or study business viability to land at Canadian airports.

Let’s be competitive. Surely this is the right time…

 Experimenting with Kelowna - Putting ‘Theory to Practice’ (or not…)

So, how can Canada somehow change the status quo, and, not have just focusing on Canadian travellers leaving the country? How can these nine low-cost players in the US (that are growing exponentially) be encouraged to actually fly to Canada? What is needed? Is it in the hands of the Canadian airports to build incentive programmes to attract the US airline low-cost companies to fly or is it the hands of the airports to have aviation and route marketing specialists liaising with the US airlines to fly to their airports? Don’t Canadian airports offer compelling business cases? Unfortunately, it seems they don’t as US airline companies prefer to sell Canada via an airport actually in the US.

And, how about the Canadian National Tourism board? How do they can engage with airports in Canada to discuss a stronger work together mentality in order to encourage more Americans exploring Canadian cities and destinations? And, at the regional and local levels, how can tourism teams work together with regional airports to identify which routes and carriers could be of interest? Besides, how can they win more US weekend-break travellers to fly to Canada?

For example, let’s take a closer look at the region of Kelowna. In 2017, the city and region made a study on the impact of tourism to Kelowna, and the greater Kelowna region. Was the USA, a key source market of the study? We believe it was not, as in summer 2022, there are no flights from any of the nine low-cost US carriers to Kelowna airport. In fact, the only international flight to Kelowna International airport for the forthcoming summer is from Seattle (with Alaska Airlines). In fact, it is a daily flight from Alaska’s subsidiary carrier, Horizon Air, using a 76-seater turboprop. So, overall, there are just 76 planned seats a day, direct flight from the US to this region, or, put it another way, around 532 seats a week. And, if we look at the 2017 study, in those days, the region had around 4,400 rooms or 8,500 beds available. 

 So, with 76 daily seats, it is fair assessment that direct flight travellers to this region from the US are totally irrelevant to help in pushing hotel and tourism stays. Maybe the US tourists drive, or come via a connection over Vancouver or Calgary? 

 Why this case? And new Learnings for Canada…

 Well, let’s go back to our earlier discussion. Tourists are looking for new, and, different destinations. Particularly those that offer a sense of space, nature, green, and with a belief that I’m not ‘holidaying with hundreds of others’. Besides, low-cost airlines seem to have a thirst to experiment with new routes and connectivity.

 So, is Kelowna and the region not offering such?  Kelowna is at the heart of a key wine region in Canada, and, according to the Tourism Board, the greater Kelowna area is a tourism hotspot in the Okanagan Valley, located on the shores of the Okanagan Lake, and, adjacent to mountains and forests. In addition, it offers a great number of attractions for outdoor enthusiasts including those looking to be close to nature. In essence, the destination has it all to attract low-cost carriers who have been experimenting with new routes and destinations!

How can Kelowna and the region work with the airport to build a strong argument for US low-cost carriers to fly? Can the region work together and bring in US dollars, and, not having the belief that the only strategy that will work is to chase Canadian airline companies to fly from Kelowna to Phoenix, or, the beach destinations such as Los Cabos and Cancun?

The pandemic has impacted everyone in the world, in both a negative but also positive ways.

It is clear that at a personal level, we have slowed down to enjoy what really matters in life. Perhaps, we’ve not had the time to question our behaviors up until the pandemic started. Many have changed their lives and behaviors all together. Some of the positive things that have happened to many of us are staying healthy during the pandemic, and have made a significant lifestyle change, including more time for outdoors activities and, looking to experience nature as a key component within our travel and holiday plans which we believe tends to the favor the Canadian travel industry.

Therefore, from a marketing perspective, what is the Canadian inbound Marketing story? Is it time to really take advantage of what Canada can offer and reposition its country and brand to the world? Or, at least in the first place retarget with a new and fresh approach the US tourism industry while working alongside with the many new low-cost airlines as it plans to grow its presence in the US?  

In our opinion, it is time for a new Air Services and Tourism Development vision in Canada. By not considering the inbound traffic and its potential, the country and its air transportation stakeholders are only benefiting from one side of the coin side (taking Canadians out…).

Finally, it is time for regional airports and tourism teams to come together on a new inbound connectivity strategy and vision. Canada is waiting…

This white paper is a brief summary of a project executed and a collaborative effort among Mr. Gavin Eccles, Management Consultant and Professor, Mr. Mike Miguel, Airline Consultant and René Armas Maes, VP Commercial and Airline Consultant at Jet Link International LLC. The findings, interpretations and conclusions expressed herein are a result of a collaborative effort among the authors. Authors can be contacted via LinkedIn.