Prosperity zooms in with the airlines (YLW)

[CanadaEH]

http://canada.com/search/story.aspx?id=57ad20e0-bc70-466f-b14e-a88f4c2a6d7c

KELOWNA City's international airport has become the 11th-busiest in Canada

KELOWNA - Horizon Air recently celebrated its fifth anniversary flying from its Seattle hub into Kelowna International Airport.

When Alaska Airlines' short-haul subsidiary came to town, it put 100 more cities within a one-stop flight of the Okanagan city, says Kelowna airport manager Roger Sellick.

''All of a sudden getting from Kelowna to Los Angeles or San Francisco became very inexpensive,'' he recalls.

Within a year it became apparent Horizon wasn't just carrying Okanagan residents stateside, either. Just as many American travellers were coming in the opposite direction, inbound to Kelowna.

Little wonder that Kelowna International has become the 11th-busiest airport in Canada, ahead of those serving much larger markets such as Hamilton, Quebec City, Regina, Saskatoon and St. John's.

Transportation improvements, especially in air travel, have played a big part in Kelowna's economic transformation since 1990 into B.C.'s heartland tiger.

''One of the big things that Kelowna has that, say, Kamloops doesn't is just the ease of getting to the main hubs like Vancouver, Seattle, Calgary,'' says Raghwa Gopal, president and chief technology officer of Vadim Software, a developer of financial software for municipalities and one of more than 200 technology firms that call Kelowna home.

Cheap and frequent flights make it easier to lure talented or experienced employees from larger centres, not to mention allowing executives and salespeople easy access to the outside world.

''Flight reliability is a big, big issue with corporations when they're locating,'' says Robert Fine, economic development commissioner for the regional district of Central Okanagan.

Certainly Kelowna had little high technology to speak of in the 1980s, when a return flight to Vancouver or Calgary cost upwards of $400. The alternative was a six-hour drive to Vancouver via the Hope-Princeton Highway.

Kelowna at the time was a sleepy fruit-growing and retirement community. The only major private-sector employers were the defunct Western Star Trucks and a couple of sawmills. The best and brightest out of local high schools typically left town to pursue educational and career opportunities somewhere else.

But two important things happened in the 1990s to stem the outflow. The Okanagan Connector (Highway 97C) was completed in 1990, bringing the coast within a four-hour drive. Then in 1996 Westjet came to town.

Americans still talk about the "Southwest Effect" -- how passenger traffic tended to double within five years of discount pioneer Southwest Airlines initiating service to a city.

''It more than doubled here,'' Sellick says of Kelowna's air traffic after the arrival of Westjet, which was modelled on Southwest, with a $45 one-way fare to either Calgary or Vancouver.

''We moved from the 17th busiest to 11th busiest [Canadian airport] in 24 months."

Sellick expects it will become the 10th busiest when Montreal's Mirabel shuts down its passenger terminal in the coming months.

Westjet had chosen Kelowna for its inaugural schedule in part because of its location midway between the two larger cities, but it quickly became an important traffic generator in its own right. Tourism in the Okanagan, once focused almost entirely on July and August, grew into the shoulder seasons. Ski packages to Big White and Silver Star began to attract people from outside B.C. Prairie golfers started coming in the spring to practise their strokes. Wine tourism -- which for obvious reasons never suited the rubber-tire vacation -- took off.

''I don't think Westjet realized we would be such a large part of their business,'' Sellick says.

The no-frills carrier now offers long-haul flights out of Kelowna to destinations as far east as Hamilton.

The mainline carriers, Canadian Airlines and then just Air Canada were forced to cut their fares to Kelowna in ways that they still haven't in Penticton, Castlegar or Cranbrook. Last winter Air Canada ran direct flights from Toronto during the ski season.

Meanwhile regional independents such as Central Mountain Air got into the act, offering direct flights to other B.C. cities such as Abbotsford and Prince George. Finally, Horizon created a vital link to the United States.

In addition to the indirect benefits to tourism and companies locating here, the growth of air traffic has provided a direct stimulus to Kelowna's economy. Today 1,835 people work in and around Kelowna International Airport, including employees of companies such as Okanagan Aero Engine, AOG Air Support and Northern Air Support. The terminal generates $265 million a year in economic benefits, Sellick says.

Even through the worst two years in the history of commercial aviation -- with 9/11, SARS and the war in Iraq -- Kelowna's skies have remained mostly sunny. Though the number of flights has scaled back to 80,452 last year from a high of 92,681 in 1998, the number of passengers rose over the same period, and dropped only two per cent -- to 839,654 from 850,311 -- in the depths of the downturn between 2001 and 2002.

''Of the top 20 airports in Canada, Kelowna was the least impacted" by the troubles in commercial aviation, Sellick says.

One advantage Kelowna's airport has enjoyed since its opening in 1946 is local management. The city ran it on behalf of Transport Canada long before the federal department spun off most Canadian airports into autonomous entities in the 1990s.

''It gave us greater flexibility than federally operated airports,'' says Sellick, who has served as airport manager since 1980. Then when Transport Canada got out of the business of running airports, Kelowna was ahead of the field with respect to attracting new business.

Sellick credits then-mayor Jim Stuart with having the foresight to spend $6.5 million to extend the runway by 2,000 feet in 1991 so that the airport could accommodate larger aircraft than the Boeing 737s then making the trip.

''It was an investment in our future at the time. We didn't have a carrier that needed an extended runway,'' he says. However there soon would be.

''There's no question in my mind that Westjet would not be running the service they are today without that runway extension,'' Sellick says.

You can trace the whole development of the Okanagan Valley -- long an isolated Shangri-La walled off by mountains and the U.S. border -- to a series of transportation improvements, reflects Dave Swales, area manager of operations and maintenance for the highways ministry.

First the Canadian Pacific Railway came to Vernon in the late 1800s, making it the largest town in the valley. Then Vernon was eclipsed by Penticton in the heyday of the Kettle Valley Railway. Kelowna only caught up to its sister cities in the early 1960s, when a floating bridge across Lake Okanagan replaced the old ferry.

The addition of the Okanagan Connector, which now averages 6,324 vehicles a day in the summer, further reconfigured road traffic patterns around Kelowna, which had always boasted the most developable land of the three. Some residents speculate that a proposed four-day week in Lower Mainland schools could result in an even bigger property boom as the four-hour drive seems less long for city dwellers looking for weekend and vacation homes.

But even Swales, the highways man, concedes the airport may have played a bigger role in Kelowna's 15-year rise.

The connector ''lessened the time it took to travel to Vancouver, no doubt, but Kamloops got the same thing and didn't experience the same boom,'' he reasons.

While admittedly biased, Sellick has no doubt that, like the railroads and highways of yesteryear, airports are now the most important pieces of a growing city's transportation infrastructure. There is a long-term trend towards shorter and more frequent vacations, he notes. The average now is three days, as opposed to the traditional two-week summer driving safari.

''We estimate that 17 per cent of all visitors to the Okanagan -- not just Kelowna -- now arrive and depart by air,'' he says.

[Guest Operation Bomberclad]

Not like CRA or Air BC had anything to do with it in the past-

By the way, it seems all of your news sources are from the same content provider who has a vested interest in boosting Wetjest shares and casting aspersions on AC.

:[

OB

[Guest pitstacker]

I work at YLW, and I agree, this airport wouldn't have expanded the amount it has had Westjet not come in. The arrival of WJ lowered fares, thus creating more potential pax. The fares on Jazz would be alot higher if WJ wasn't around.

PS. I do not work for Westjet

[Guest Operation Bomberclad]

Don't believe everything you read in the paper, then. And, you have an incredibly short memory.

:[

OB

[CanadaEH]

What kind of a response is that? CRA and Air BC may have started flights to Kelowna, but they did nothing but offer high fares. Westjet started flying with the "stimulate air travel" mentality and have since made travel affordable to those who couldn't otherwise pay the sky high prices that Air BC offered.

Stop living in the past and ignoring the present.

[Guest AME]

The difference was that KI and ZX served all the communities in the Okanagan, and because of this each route had to support itself, then along came WS and with remarkable PR managed to effectively consolidate most of the traffic from the surrounding communities into YLW.

I'm not denigning WS has done alot, but had KI and ZX opted to only serve YLW they would have had F28s and 146s flying full all day and the price might (notice I said might) not have been that much different from what WS charges. But unlike WS, KI and ZX chose to serve all communites, which as it turns out was their mistake.

Brett

[Guest Operation Bomberclad]

So your beef is with the regionals-that are "not really there" and not the mothercorp, or is the mothercorp with the evil empire?

From my experience, flights were pretty full on YVR-YLW on Dash-300s, which for business travellers was the most convenient way to travel and less likely to go-around in a foggy patch than a 737.

As I understand it, Wetjest was obliged to pull flights from that very route in the end, despite its major advantages, such as lower fares.

But the nutty thing about this whole argument is Wetjest's complaint that they are being undercut, so how is Wetjest being undercut by unfair competition when fares for regional travel are "skyhigh?"

(Even Klyde wants turboprops now, which jeaopardizes Wetjest pilots' jobs.)

:[

OB

[proview]

The Kelowna situation is a good example of why a point to point operation like Westjet has a competitive advantage over a network operation like Air Canada. Of course, Kelowna by itself is only part of the deal. Consider the place where I live, which is Edmonton. In 1998, The Air Canada unit at that time operated 12 flights per week between Edmonton and Kelowna with a BAE 146. That works out to almost 800 seats per week.

Today that service is gone (the market could not economically support non stop service, we were told). However, Westjet operates 14 flights per week (even in the off season) with a B737. That works out to more than 1600 seats per week. What is more, almost all of the traffic is probably between those centres, while the Air Canada service also included considerable Edmonton-Victoria traffic.

One does not need to be an expert to see that Westjet has lower costs than any reasonable Air Canada service could on this route, and also that travelers will always prefer the non stop service over a routing that goes through Calgary or Vancouver. For a hub and spokes carrier it will always be more expensive to operate a direct spoke to spoke service than to try an push the traffic through a hub. Hence Westjet gets a nice, profitable 1100-1200 passengers a week each way (assuming their average load factor).

I am not employed in the air line industry in any way.

[CanadaEH]

So your beef is with the regionals-that are "not really there" and not the mothercorp, or is the mothercorp with the evil empire?

Did I say I had a beef? Just stating the facts.

From my experience, flights were pretty full on YVR-YLW on Dash-300s, which for business travellers was the most convenient way to travel and less likely to go-around in a foggy patch than a 737.

Thats great but that has nothing to do with lowering fares and stimulating air travel.

But the nutty thing about this whole argument is Wetjest's complaint that they are being undercut, so how is Wetjest being undercut by unfair competition when fares for regional travel are "skyhigh?"

I never said that regional prices are sky high. They used to be in cities (such as YLW) before Westjet came along and have since adjusted prices to be on par with Westjet. FYI - I just checked prices for flights from YVR-YLW and the fares were basically the same.

Westjet's arguement that they are being undercut is a legitiment arguement on some routes (i.e. YXX-YYC, YVR/YYC/YEG-YYZ).

[Guest Operation Bomberclad]

Fares adjustments were implemented with changes in the market due to 9/11, when people started driving on shorter sectors. The regional operation lost a lot of money in those days.

As far as I know the regional sector prices remained high until just after that time. Load factors were very consistent throughout, and despite CCRA, Jazz has been able to show modest growth despite damning challenges, such as the advent of Zip, 9/11, SARS, CCRA, Merger and parking of an entire fleet of 40 jets(F28s).

From all indications, the regional market is robust and behaves somewhat differently than the low cost sector, so the cost structure and fares are different.

If you wanted to make accurate comparisons, then you would have to find out which flights are Zip and the corresponding fares on sectors that Zip operates.

Obviously, regional/low cost overlaps are frequent, but you have to remember that market segmentation is a given as the regional operation goes to far more airports than both low cost operations combined, and has a substantial transborder operation as well.

:[

OB

[Guest Operation Bomberclad]

Rationally, your explanation is good, and follows the comparative information available to investors very well. But it only focusses on one segment of a low cost domestic market.

But there is a definite economic at play in the airline industry which analyst reports avoid any reference to how a regional operation compares, for example which does not fit into the low cost model, but which fills a dual role of point to point and hub travel.

Low cost is welomed by airports, passengers, governments, manufacturers alike, because the growth pattern is very consistent and provides revenue in the form of fees. The only person who loses out is the consumer, because with the implementation of low fares, then additional fees added on generally go unquestioned where they had once been paid for under one price.

There are also major concessions made for the benefit of low cost operations by interested parties in muncipalities/provincial gov. as a matter of political/vested interest which cannot be discounted.

imo, there is no magical gold-spinning business plan here, but a rather politically motivated market manipulation on the part of all the players. The majors have benefits too in this scenario, but are in the main carrying overburden on expenses where low cost may have a specific advantages. There is a definite cause and effect relationship here, and it is focussed on interest in the stock price of the low cost carrier.

I am somewhat confused however, looking at the mothercrop from a regional perspective in trying to understand why they cannot make money enough on international routes since they have a monopoly, to make it through the hard times, but that is for a mainliner to sort out.

The international should be making money hand over fist, not to mention that the regional has been under growth modestly but consistently. But I understand that the airline will primarily consist of International(intercontinental) /Low Cost(for domestic) /Regional eventually.

Hope that helps.

:[

[Guest SDR]

I worked the ramp in YLW for four years, loading both CRA and Westjet. AirBC and CRA used to go back and forth from Kelowna to Vancouver with the same departure times. They rarely left full, except @ Xmas time. Once they joined teams and eliminated half the flights, The dashs filled right up. When the weather in Kelowna came down, The Dash - 8s missed just as often as the 737. The way I saw things, it was no more convenient to take the Dash 8 or the 737.