In a sudden about face, New Leaf Travel Co., which began sales of ultra-low-cost airfares on Jan. 6, is temporarily halting sales while it waits for the country’s airline regulator to complete its review of licensing procedures.
In a statement late Monday afternoon, the Winnipeg-based upstart carrier with destinations to seven secondary Canadian cities on its route map, said it would refund all bookings within 72 hours. Its first scheduled flight was supposed to take place on Feb. 12. NewLeaf said it planned to resume ticket sales sometime in the spring.
“During this uncertain time, we didn’t want to put anyone with existing bookings at risk, and we wanted to give customers time to make other travel arrangements,” said NewLeaf chief executive officer Jim Young in a statement, saying that “thousands” of customers had already reserved seats.
Last week Young told the Financial Post that NewLeaf was complying with rules from the Canadian Transportation Agency (CTA), which is holding a public consultation until Friday on how it should evaluate licence requirements. The CTA also confirmed that NewLeaf would not require a domestic carrier licence, but that the situation might change after the review was complete.
NewLeaf had not planned to operate flights itself, but was initially contracting out the flights through a “wet lease” arrangement to corporate-charter provider Flair Airlines Ltd.
“Now, there is ambiguity in the air as to whether we need to amend the relationship with our air service provider, or whether we need to have a licence ourselves,” said Young.
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The agency’s licensing review focuses on what it classifies as “indirect air service providers,” like NewLeaf. At the end of the consultation, the CTA said it would adjust rules if needed for companies that fit in this category, although it did not say when that would happen.
On Monday, a CTA spokesperson said, “Since the launch of its review process in the fall, the Agency has clearly explained that while the review of companies who bulk purchase all seats on planes and then resell those seats to the public, such as NewLeaf, was ongoing, such companies would not be required to seek air licenses.”
While many customers will likely be disappointed that the opportunity for steeply discounted fares has been lost, at least for the time being, one consumer advocate is pleased.
“This fully vindicates my position: the rule of law prevailed over the narrow and private interests of the owners of NewLeaf,” said Gabor Lukacs, head of the advocacy group Air Passenger Rights, who had publicly warned that NewLeaf’s lack of a licence could leave passengers without recourse if they needed to make a cost claim against the carrier.
At a press scrum in Winnipeg, Young said he was confident that his decision will not tarnish NewLeaf’s reputation.
“I hope that our customers and people that are considering flying on us will see that we’re actually wanting to be very upfront and honest and open with them,” he said, adding that no NewLeaf employees will be affected.
However, Raymond James analyst Ben Cherniavsky doubts NewLeaf will take reservations again. “NewLeaf looked like a rather bad idea from the beginning. Now we are pretty certain it will never get off the ground,” Cherniavsky wrote in a note.
Airline industry consultant Robert Kokonis sees NewLeaf’s move as a temporary setback and dismisses any concerns that consumers will be reluctant to book again with NewLeaf.
“I think NewLeaf is doing the right thing by suspending (sales),” said Kokonis.
However, now that the issue of licensing requirements has come into the public eye, Kokonis believes it needs to be escalated beyond the agency level into the hands of the federal government.