Flights cancelled: CanJet

The abrupt shuttering of CanJet demonstrates just how tough Canada's air-travel industry can be.

Nova Scotian conglomerateur Kenneth Rowe is not known for propping up money-losing businesses. That may have been the finishing blow for CanJet Airlines, which abruptly ceased all regularly scheduled flights, this September.

Rowe founded CanJet, a wholly owned subsidiary of his Halifax-based I.M.P. Group Ltd., in 2002. It became Canada's third-largest airline, flying to more than a dozen destinations (mostly in Eastern and Central Canada.) But with 10 leased Boeing 737s and more than 450 employees, it was considerably smaller than its nearest competitor, WestJet. At best, CanJet commanded less than 5% of the domestic aviation market, and an estimated one-fifth of the market in its home base in Atlantic Canada.

Rowe's three attempts to run airlines have all met defeat. He sold a previous venture–also called CanJet–to now-defunct Canada 3000 in 2001 for $7 million in stock. Executive vice-president Julie Gossen (Rowe's daughter) cited high fuel costs, rising airport fees and increasing competition in CanJet's collapse, and company executives reportedly complained to government that Air Canada and WestJet flooded Atlantic Canada with additional capacity. “The abruptness of this announcement caught me by surprise,” said aviation analyst Rick Erickson. “I don't think there was a great deal of planning put into this.”

Atlantic Canada is a tough market: its people are fond of cheap fares and don't mind driving long distances. And CanJet's aspirations to become a national carrier came to naught. It introduced seasonal flights to Vancouver and Calgary, in 2005, but quickly pulled out of Vancouver. It briefly flew out of Hamilton but backed away from that, too. In May, CanJet partnered with Harmony Airways, which runs four 757s out of Vancouver. “Aviation entrepreneurs in this country [feel they] have to go national,” observed Erickson. “But the incumbents are so entrenched. It's very tough to break in.”

Then there were unions. Rowe identified their absence as an important part of CanJet's low-cost strategy, in an interview with Canadian Business last year. But in March, its 125 flight attendants joined the Canadian Union of Public Employees. Then, in June, CanJet pilots joined the Air Line Pilots Association (ALPA). The latter union complained that CanJet management refused to recognize it. “It seems very clear they are not comfortable moving forward with a relationship with their employee groups,” said ALPA spokesman Pete Janhunen. (Neither Rowe nor CanJet's communications chief returned calls for this story.)

Airlines are difficult to wind down gracefully. CanJet's retreat was more elegant than that of Jetsgo Corp., which collapsed into bankruptcy in March 2005. Jetsgo stranded customers with no warning and provided no refunds. In contrast, CanJet gave customers a week's notice to book elsewhere, offered to help them do it and will refund their money. The company will focus on its charter business and claims some CanJet employees may find new jobs in its charter operations or within I.M.P.

The future of CanJet's remaining entrails, though, are cloudy. The charter business offers less risk than regularly scheduled flights, but also thinner profit margins. Meanwhile, Erickson predicts consumers won't miss CanJet–Air Canada and WestJet will divvy up the spoils, with negligible impact on service and airfares. (Air Canada announced plans to add flights and larger aircraft to serve Atlantic Canada.) Said Erickson: “This carrier's going to disappear without even a whimper.”