New Flair Airlines CEO targets lower costs

Flair Airlines has hired the former chief executive of aspiring startup airline Canada Jetlines Ltd. to lead its operations as it braces for steep competition in the ultra-low-cost market.

Kelowna, B.C.-based Flair Airlines announced Tuesday that founder and former president Jim Rogers, who sold his shares in the company, will be replaced by Jetlines co-founder and former pilot Jim Scott. Rogers will remain on the company’s advisory council.

First on Scott’s agenda is to lower costs at Flair, which began operations as a privately owned charter service. Scott said he plans on decreasing costs by 20 per cent and improving the airline’s cost per available seat mile (CASM), an industry measure of how much an airline spends to fly a passenger.

During the peak summer season, the new chief executive said Flair’s CASM sits at about 11 cents and increases more during the winter season, well above the six- to eightcent target he has set for the airline going forward.

In an interview, Scott said he plans on lowering Flair’s costs by negotiating with vendors to get better operating agreements on things such as fuel, as well as by improving scheduling so fleet usage is maximized and crews are flown more efficiently.

“We spent $3 million a year moving flight crews around on other peoples’ airlines and on overnight (duty),” Scott said. “We need to bring that down.”

The change in leadership comes as Flair faces the prospect of a more crowded ULCC market, as WestJet and Jetlines, the company Scott co-founded, gear up to launch their own ultra-low-cost airlines in the summer.

While Scott says the company will be ready to compete with the new carriers, Raymond James analyst Ben Cherniavsky said that WestJet’s ULCC Swoop — which is expected to begin selling tickets in February and begin flying in June — will “make it very difficult for any ULCC to stay in the air or get off the ground.”

When it comes to Flair’s change in management, Cherniavsky said in an email that it “does not increase their chances against Swoop.”

“They lack the costs, aircraft type, and balance sheet to compete,” he said.

Cherniavsky wrote in a detailed analysis sent to clients that the launch of Swoop will serve as a defensive move for WestJet.

“By taking advantage of its established position, deep pockets, and strong understanding of the market, the company can quickly move in... blanket-bomb Canada with ultra-low fares and capitalize on the first-mover advantage,” he said.

“Effectively, we believe this will neutralize any new entrant and put a nail in the competitors like Flair.”

Scott said he hopes the six-month head start Flair has on WestJet will help establish the airline’s market position in the ULCC space.

“We have some time to get our costs in line, get our brand out there, and attract repeat customers,” he said.

He said the focus will be on attracting more millennials to Flair, who make up 70 per cent of the airline’s customer base, by offering an improved website with a focus on smartphones, and partnering with vendors to offer unique services to passengers. He also said Flair will be a “premium ULCC” that will charge customers more for more spacious seats at the front of the plane. “We’re missing out on ancillary fees left, right and centre,” Scott said. “We have 34-inch seat pitch (distance between seats), when most of what you’re seeing in the marketplace is 31. We’re not charging the customer any more for that seat selection, so we’re probably giving up $3 million in revenue just on that one item.”

Flair said it has flown more than 500,000 passengers since June 2016, and expects to hit the onemillion-passenger milestone in 2018.