Wow Air’s Canadian expansion could lead to lower fares

A new discount carrier has entered the Canadian airline market, adding a low-cost option for travellers looking to get to Europe and willing to have an Icelandic stopover along the way — a move one expert says should keep fares competitive.

Iceland-based Wow Air announced Thursday that it’ll begin running four weekly flights between Toronto or Montreal and Europe, with refuelling stopovers in Reykjavik, starting in next May.

Wow’s fares will start at $99 one way to Reykjavik, and another $149 from Iceland to 16 other European destinations including Berlin and London. Wow is already flying out of Washington, D.C., and Boston in the United States.

The entry of an international discount carrier into the Canadian market could be good news for consumers, Ambarish Chandra, an assistant professor at the University of Toronto who researches airline markets, tells Yahoo Canada News.

“I’ve long believed that there’s insufficient competition for travel both within Canada and in between Canada and other countries. I’m happy to see them enter.”

The Wow expansion announcement comes just two weeks after Canadian airline WestJet announced its first flights to Europe with routes going to London. And Air Canada’s discount Rouge airline also recently announced a Toronto-London (Gatwick) option.

A lack of competition in the Canadian airline market has created a situation where low-cost carriers can fill a gap, and Chandra believes that Wow Air could succeed if it manages to keep fares down.

“We don’t have enough carriers domestically. We don’t have enough carriers internationally,” Chandra says. “And when [carriers] have tried to enter in the past, our government has gone out of the way to stop them. It’s sort of like the government will protect us from low airfares.”

The fares Wow Air is promoting are considerably lower than the existing options. Flying one way from Toronto to London (Gatwick) next May 27 requires travelling overnight, but comes in at $149.00 with taxes and fees. The same route on the same day with WestJet costs double at $298.66, and is $425 with Air Canada’s Rouge carrier and $461.90 on Icelandair.

One way Wow cuts costs by flying narrower Airbus A320 and A321 planes, which are cheaper to run but require the Reykjavik stops for refuelling. The fare itself also covers just a carry-on bag, which cannot weigh more than five kilograms. Additional carry-on bags, checked baggage, meals and other extras comes with additional fees. For example, adding a larger carry-on bag and a single checked bag on the Wow Air flight from Toronto to London nearly doubles the cost to $290.

That stopover could be a barrier to getting Canadian customers on board, Chandra says.

“That’s actually quite challenging. Once you build in a time difference, etc., actually you’d almost be doing a red-eye at some points,” he says.

But while a required stopover can be unappealing, it can also be an advantage for travellers looking to visit multiple destinations in one trip. When Lydia Péquegnat of Toronto travelled to France for a wedding last month, she flew Icelandair in part because of the opportunity to build in a stopover in Reykjavik. While she paid a bit extra for more seat room on Icelandair and found that flight comfortable, she’d also consider forgoing some of the luxuries and flying with Wow Air.

“I would totally do that, especially because I want to go back to Iceland,” Péquegnat says.

When Giulia Pines Kersthold wanted to meet a friend travelling to Rejkjavik a year ago, she flew Wow from her home in Berlin. The seats were uncomfortable and the experience wasn’t luxurious, she said, but the fare was good and the flight itself was short.

“You get what you pay for, I guess,” Pines Kersthold said.

At a time when even major carriers are charging for food and baggage, consumers might be just fine with a flight that cuts some of the creature comforts but doesn’t hurt the wallet, Chandra says. And if Wow Air can make a go of it in the Canadian market, other airlines will eventually have to respond, he says, pointing to his own research showing that Air Canada has lowered domestic rates in response to competition from Porter Airlines.

“As long as they’ve got the fares at this level, or even somewhat higher, they’re severely undercutting Canadian carriers and all of the European legacy carriers,” he says. “There’s a lot of room for them to attract passengers. We’ll have to see if any of these established carriers will respond.”