NewLeaf Says It’s Developing A Plan To Work With Agents

Open Jaw
by Bruce Parkinson

ean Dacko at the YHM launch of NewLeaf last week

Like most of the ultra-low-cost carriers around the world whose success it hopes to emulate, Canada’s NewLeaf is launching next month with an exclusively direct-sell strategy, taking consumer bookings online and over the phone and avoiding the travel agent distribution channel entirely.

But Chief Commercial Officer Dean Dacko says it won’t be long before that changes. “It’s not because we don’t like travel agents. I’ve spent a lot of time on that side of the desk and I know the importance of great relationships with that part of the industry. We’re working on a way for agents to work with us and book us and we’ll be bringing that to market soon.”

In its launch phase, Dacko says NewLeaf is striving “to avoid costs of any kind,” as it works to gain a foothold in the virtual duopoly of the Canadian domestic aviation market. He says AC and WS are already dropping fares as NewLeaf prepares to launch flights between 7 Canadian secondary airports on 12FEB.

“They just don’t want it to happen. We’ve been in the market for just 8 days and we’re seeing a whole lot of activity in the pricing. That wouldn’t happen if we weren’t here and if we were gone, pricing would go right back to where it was.”

Dacko, who was a project director during the development of Signature Vacations and spent the first 5 years of this century as Director of Marketing for Air Canada Vacations, says the reaction by Canada’s 2 largest airlines illustrates the need for what NewLeaf seeks to provide – a bare bones flying experience at the lowest possible fare.

“The ultra-LCC model is hugely successful and it is being emulated by every other airline worldwide. A seat on a silver tube is a commodity. The U.S., Europe and Asia all have an ultra-LCC alternative and there’s no reason why Canadians should be treated differently.”

As even legacy airlines have unbundled their services and begun charging pax on an a la carte basis, Dacko says Canadians are getting a raw deal. “The thing that has been missing in Canada is the corresponding lowering of the base fare as the big airlines have begun charging for services once included. They took that money and put it straight to the bottom-line. That’s why they’re making record profits.”

In the press coverage of NewLeaf’s plans, just about every story runs through the long list of Canadian upstart airlines that haven’t made it. Dacko vows that NewLeaf will avoid the same fate.

“When you review all the failures, virtually every single one of them made one very simple, fundamental mistake. They tried to compete on price with a very expensive cost model, using the most expensive airports and using the most costly distribution schemes. The results were clear every time – costs were bigger than revenue. We’re not going to repeat those mistakes.”

Dacko, who returned to Canada last year after 3 years as a Senior V.P for Malaysia Airlines, says consumer reaction to NewLeaf’s plans has been encouraging. “We had a massive reaction to our announcement last week. Canadians are hungry for an alternative to paying more than they need to.”

By starting out with just 2 aircraft and flying only in Canada, NewLeaf is mitigating risk, Dacko says. But the company’s plan calls for quick and significant growth, which Dacko says is important for economy of scale. “We have access to additional aircraft and we can scale quite quickly. The faster we can scale, the faster we can continue to reduce fares.”

The U.S. market is a bit of a wild card for the airline right now, as the CAD has dropped to its lowest level in over a decade and doesn’t look like it will be rising soon. Dacko acknowledges that the loonie played a role in the selection of NewLeaf’s inaugural routes. “We need to be prudent and we made some choices. But we will be pointing aircraft southbound without doubt by next winter.”

While Dacko says the extensive press coverage on NewLeaf’s plans has been great for brand awareness, he’s not happy about efforts by passenger advocate Gabor Lukacs to dissuade Canadians from booking with the fledgling carrier. “Our lawyers are looking at some of the statements he has made. Transport Canada has no concerns over our operation. There is no issue.”

A real issue is whether Canadians are so hungry for low-cost flights that they will book only through direct channels and without the protections they enjoy through organizations like Ontario’s TICO, as NewLeaf will not be a registrant, at least in the short-term.

And of course the biggest issue is whether NewLeaf can survive the efforts by the big 2 carriers to protect their turf.

“Starting an airline sometimes feels like a crazy proposition,” says Dacko. “But from the reactions we’ve seen, we could never imagine how eager Canadians are for a low-cost alternative.”

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