WestJet cuts not a surprise, but 'pretty bad' for region, says MUN dean of business
'Nobody has a crystal ball' on when things will change in pandemic, says Isabelle Dostaler
This week's announcement by WestJet that it will be slashing 80 per cent of its Atlantic Canada flights — including between St. John's and Toronto — isn't unexpected in the current travel and economic climate, but it is grim news for Newfoundland and Labrador, says Memorial University's dean of business.
Isabelle Dostaler told CBC News on Thursday the service reduction is "pretty bad for our Atlantic region."
"It's not unexpected, I'm not surprised by it, but I think it's almost a catastrophe," said Dostaler.
The Calgary-based airline said Wednesday it is eliminating 100 flights effective Nov. 2, saying it has become "increasingly unviable to serve these markets" during the COVID-19 pandemic and Atlantic bubble travel restrictions.
"Since the pandemic's beginning, we have worked to keep essential air service to all of our domestic airports; however, demand for travel is being severely limited by restrictive policies and third-party fee increases that have left us out of runway without sector-specific support," WestJet CEO Ed Sims said in a press release Wednesday.
The Atlantic premiers released a joint statement Wednesday citing "deep concern" with the latest announcement of flight reductions from WestJet — on top of cuts this summer to some regional Air Canada services — that will "create serious issues for the Atlantic region."
The statement added that the premiers are calling for urgent action to address critical transportation links that connect Atlantic Canada to the rest of the country, acknowledging that the federal government made a commitment in its speech from the throne that it would work with partners to support regional routes for airlines.
From an economic standpoint, however, these are really, really tough times.- Isabelle Dostaler
To Dostaler, the WestJet news represents a double-edged sword in the COVID-19 era.
"It's really, really difficult because … there's such a trade-off," she said.
"We've done so well, right? Our people are healthy … we don't have much cases in our region and even less in Newfoundland, but there's a price to pay for that. You don't have as much people travelling, traffic has decreased dramatically, so it's really a difficult situation for air carriers. So not surprising, but not good at all."
Dostaler said the airline business is difficult to run when flight capacity is between 10 and 20 per cent, running near-empty flights.
"They lose so much money, they're burning a lot of cash, and it's very hard for all the carriers," she said.
"You can complain and certainly the aviation stakeholders are not happy at all with the Atlantic bubble, right, but it's the trade-off that we've made. We've done really well, that's also the price that we have to pay."
Space for regional smaller carriers
While the Atlantic premiers said they will be in talks with the federal government, Dostaler added she has "mixed feelings" about the idea of an injection of money from Ottawa into the airline industry.
"I don't really like the idea of the government putting in money in airlines," she told CBC's St. John's Morning Show. "When things are going really well, what's happening? They have these huge salaries paid to leaders of these organizations."
She added that there is capacity in Canada for smaller regional carriers to set up routes — although, there are some drawbacks.
"The thing the Canadian public doesn't know is that there is entrepreneurial capacity in the field of aviation. And yes, you know, there would be room for smaller players PAL is one in our province. There are others across the country," she said.
"Often the public doesn't know them, so it would be neat to have an aviation policy in Canada that creates good conditions for small players to survive, which is something extremely difficult to do when you operate in the shadow of Air Canada."
That difficulty of competing with big carriers like Air Canada, Dostaler said, is that larger companies are able to lower their prices to compete with smaller carriers.
"For communities, it's good, because you have low fares for a while, until the new players are out of the market and fares go up again," she said.
"It's challenging — we live in a challenging country, right? Long, long distances and very low density of population."
WestJet said it would return to the routes it has cut when it becomes economically viable to do so, but Dostaler said that could prove more difficult — and take longer — than people may realize.
There's no guarantee, she said, that things will return to the way they were pre-pandemic
"Nobody has a crystal ball. It's difficult to put a number of years and say, in two, three, four years — a few months ago we would hear, 'Well, it will take two years,' and now people are talking another three or four years. It also depends on us, right? How will we behave, will we go back to our old habits of travelling a lot?" Dostaler said.
"And you can think in terms of saving the planet in a sense and lesser amounts of emissions and all that. All in all it might not be a bad thing. From an economic standpoint, however, these are really, really tough times."
With files from The St. John's Morning Show