Airline Executives Say Fares Bound to Rise Following Jetsgo Failure

March 14, 2005
Top executives at Air Canada and WestJet say consumers can count on paying more now that their discount competitor Jetsgo has been forced into bankruptcy.
OTTAWA (CP) -- Top executives at Air Canada and WestJet say consumers can count on paying more now that their discount competitor Jetsgo has been forced into bankruptcy.

Robert Milton, CEO of Air Canada's parent company ACE Aviation Holdings Inc., said Sunday the Jetsgo failure is an example of what happens when an air carrier doesn't charge enough to cover its operating costs.

``This was inevitable,'' Milton told CTV Question Period. ``When the fares are $49, or $1, it is too good to be true, and this is going to happen.''

Milton said fares in the industry are sure to rise in future because they have been so artificially low for so long _ an assessment shared by Clive Beddoe, CEO of WestJet.

Beddoe insisted, however, that the increases will be modest.

``Ultimately you have to make a profit,'' he told CTV. ``So costs to the consumer will climb somewhat, but in my view it doesn't have to climb very much for the consumer to be able to provide an adequate fare to the airline.''

Beddoe was critical of Jetsgo for continuing to sell tickets right up to the eve of bankruptcy, when there was little chance they would ever be honoured.

``I suspect that the whole operation of Jetsgo was funded on advance ticket sales,'' he said. ``There is a question whether or not there should be regulations to prevent that.

``It would certainly lead to a much more healthy industry. We would certainly be one that would support that.''

Milton said he's ``open to almost anything'' to make sure travellers aren't stuck with worthless tickets if an airline goes belly up.

``If a fund was to be set up (or) whatever it might be to protect the consumer, we're fine with that.''

He added, however, that any such move should be coupled with cuts in airport rents and security fees paid by air carriers if Ottawa wants to restore the health of the industry.

Transport Minister Jean Lapierre has been lobbying for rent and fee reductions but failed to convince his cabinet colleagues to take action in the recent federal budget.

Lapierre also came under fire when he admitted last week that he had contacted other airlines the day before Jetsgo declared bankruptcy but never warned the general public that anything might be afoot.

Lapierre has insisted he didn't know, when he spoke to Milton and others last Thursday, that Jetsgo would actually declare bankruptcy. Milton confirmed Sunday the minister didn't speak directly of an impending bankruptcy but was vague on exactly what he did say.

Beddoe said he didn't hear from Lapierre until after the bankruptcy was announced Friday, when the minister called to thank WestJet for helping to rescue stranded Jetsgo passengers.

The Consumers' Association of Canada is calling for Lapierre's resignation, claiming he failed Canadians by not intervening or helping prevent the bankruptcy.

``We find the minister's cavalier attitude and his callousness towards the plight of Canadian consumers appalling,'' said CAC vice-president Mel Fruitman.

``We also want to know why Lapierre and his spokespeople are refusing to answer any more questions about what he knew about the discount airline's financial troubles.''

Meanwhile, Prime Minister Paul Martin sympathized on Sunday with the thousands of passengers left stranded by Jetsgo and said ``Air Canada and WestJet and everybody is trying to do their best.''

When asked at the annual St. Patrick's Day parade in Montreal whether he could pass on the luck of the Irish to Jetsgo passengers, Martin said: ``I tell you that's pretty tough.''

Montreal Mayor Gerald Tremblay said the city will lose about 400 unionized jobs with the closure of the airline, founded by Montrealer Michel Leblanc.

``It's a big loss, but fortunately there are companies that are expanding such as Air Transat and Air Canada,'' said Tremblay, who was also at the parade.

Jetsgo has asked its 1,350 ex-employees to turn in their parking passes, pagers and other company goodies if they want their final paycheques.

The airline stranded 17,000 passengers across North America when it ceased operations at midnight Thursday night.

As all companies must to do when they seek bankruptcy protection, Jetsgo is offering to pay all back wages up to midnight Thursday when the airline grounded its 29 aircraft. It is also offering employees their 2004 and 2005 vacation pay and outstanding per diems, provided company property is handed over.