canjet-cp-7071155

As late as Tuesday morning, CanJet was still advertising flights from Halifax to Toronto for only $109. ((Andrew Vaughan/Canadian Press))

Halifax-based discount carrier CanJet Airlines is pulling out of the scheduled airline business next week to focus on charters.

"With the rising business risks of operating a scheduled airline, IMP has decided to suspend year-round scheduled airline service and focus on their increasing charter business," Kenneth Rowe, chairman and chief executive officer of parent company IMP Group Ltd., said Tuesday morning.

He promised to offer alternative travel arrangements for anyone booked on its flights after Sept. 10, the last day of scheduled service, or give full refunds to ticket holders.

Rowe did not immediately disclose how many employees will be affected. Some will be offered positions in IMP's other aviation businesses.

Julie Gossen, Rowe's daughter and CanJet's executive vice-president and chief operating officer, said Tuesday the airline was the victim of ever-increasing costs at a time of growing competition.

"Unfortunately, our airline, over the years, has been faced with many uncontrollable challenges within the industry including high fuel costs, continual increases to airport fees, as well as increases in competitive capacity on our primary routes," Gossen said.

It had no alternative but to restructure as a charter operator.

"Subsequently, these challenges have forced CanJet to suspend all scheduled service while we endeavour to focus on our charter opportunities," Gossen said.

The news came as a shock to employees and the Canadian fliers who have come to enjoy CanJet's low airfares and its service to Atlantic Canada, a region that local residents say is under-serviced by the mainstream carriers.

The company was advertising flights from Halifax to Toronto for only $109 as late as Tuesday morning and flights from Toronto to Calgary for just $177.

As of Tuesday, the airline was still advertising for pilots and flight attendants.

"CanJet Airlines, Canada's low-fare leader, wants to hear from enthusiastic and energetic individuals that are interested in joining our team," the company said on its website.

Only last June, Gossen promised to double service to Calgary from Toronto, with connections to the Atlantic Canadian municipalities of Halifax, Moncton, St. John’s and Deer Lake, N.L.

She also said CanJet was planning to add more aircraft to its fleet and to start year-round service to Calgary, a popular destination for Atlantic Canadians who are working away from home in the oil industry.

The airline celebrated its fourth birthday in June under the current corporate structure, with a huge birthday cake and lots of hopes for the future.

"I am very proud of our past and I look forward to our future with great optimism,” Gossen said at the time.

Launched and relaunched

Rowe started the company for the first time in 1999, as an alternative to Canada's major airlines with a focus on Atlantic Canada. That company merged with fellow discount airline Canada 3000 in May 2001, but the combined operation failed just months later.

Rowe relaunched CanJet in June 2002 — the same month that Montreal-based discount airline Jetsgo took off — as a more ambitious company, using Boeing 737 aircraft and offering travel on more routes.

Jetsgo subsequently went out of business, but CanJet carried on, slowly building its fleet of aircraft and its network of destinations.

CanJet originally had three elderly 737s flying to three destinations: Halifax, Toronto and St. John’s. It expanded to a fleet of 10 737s that fly to 14 destinations in North America, including Moncton, Deer Lake, Ottawa, Calgary, Vancouver and Montreal.

During the winter months, it runs numerous flights to the Florida resort communities of St. Petersburg, Orlando and Sarasota.

Low margins, high risks

CanJet has offered charters for some time as a small sideline to keep its planes busy in off periods.

The charters fly from Halifax, Toronto, St. John's, Ottawa and Moncton generally between 10 p.m. and 5 a.m. when the aircraft aren't being used.

The news did not surprise industry experts who have watched many airlines come and go in what is a low-margin, high-risk, highly competitive business.

"The market is not big enough to sustain growth, particularly because Air Canada and WestJet are not ignoring the Halifax market," said Jacques Kavafian, a veteran airline analyst with Research Capital Corp. in Toronto. "CanJet, being the No.3 player in the market, had nowhere to go."

Rick Erickson, a Calgary-based airline analyst, told Canadian Press it washard to tell why CanJet suddenly decided to change direction and shut down scheduled servicebecause the privately held company does not release financial results or passenger traffic statistics.

"There was no hint of this," Erickson said. But he agreed with other analysts that Atlantic Canada was just not big enough to support the airline.

"I have a feeling it's just because Atlantic Canada just isn't large enough of a region with a high enough propensity to travel, and certainly not a high enough yield coming out of those travellers to support three carriers," he said.

The loss of CanJet's regular service will have little impact on Canadian consumers, he said. "I don't think that the loss of CanJet is going to change the dynamics of the airline business and it will hardly be noticeable as far as prices go," said Erickson.

Earl Howell, a director of the Canadian Association of Travel Agents, said Tuesday CanJet's decision to end the scheduled service was not that surprising.

"It's a business, and from the word go, I think they basically said if it didn't really work well, they wouldn't continue," said Howell, who manages a St. John's agency.

"From an airline's point of view, if they didn't have full loads and it wasn't profitable, the most sensible thing to do is get out."

CanJet is a division of IMP Group Ltd., a privately held Halifax company controlled by the Rowe family. IMP has a wide range of interests in aerospace, aviation, manufacturing, health care, industrial marine products and hotels.

With files from the Canadian Press