US embassy cable - 05OTTAWA755

UNCLAS OTTAWA 000755 
 
SIPDIS 
 
STATE EB/TRA (BYERLY), WHA/CAN 
 
TRANSPORTATION FOR U/S POLICY 
 
E.O. 12958: N/A 
TAGS: EAIR, ETRD, CA, Transportation 
SUBJECT: Discount Airline Jetsgo founders, strands passengers 
 
1.  Passengers at Canadian airports expecting to board 
Jetsgo aircraft on Friday, March 11 were surprised to find 
no staff at ticket counters, and no Jetsgo flights 
operating.  There has been no official announcement, but it 
is expected that Jetsgo will seek bankruptcy protection 
later today. 
 
2. Jetsgo, which began operations in mid-2002, with several 
MD-90 aircraft, was operating as of yesterday to 19 Canadian 
and 10 U.S. destinations.  Flights to the United States were 
to Los Angeles, New York (Newark and LaGuardia), Las Vegas, 
and Sarasota, West Palm Beach, St. Petersburg, Fort 
Lauderdale, Orlando, and Fort Myers in Florida.  Flights to 
U.S. destinations were carrying principally Canadian 
vacationers.  The airline had about 8 percent of the 
domestic market share. 
 
3. In February 2005 Transport Canada revoked an operating 
certificate that allowed Jetsgo to fly between 29,000 and 
41,000 feet, forcing the carrier to run its flights at 
28,000, an altitude less efficient for fuel consumption - 
which has in turn increased their costs.  The revocation was 
due to Transport Canada concerns about deficiencies in the 
airline's manuals detailing procedures related to Reduced 
Vertical Separation Minimum (RVSM). Transport Canada 
inspectors discovered certain incomplete descriptions in 
Jetsgo manuals after being alerted about a "missed approach" 
by a Jetsgo plane landing at Calgary International Airport 
in late January 2005. In that incident, the aircraft skidded 
partly off the runway and also hit a sign, prompting a 
federal Transportation Safety Board investigation. 
4. The airline also hit a rough spot over this past 
Christmas when numerous flights were cancelled and 
passengers' baggage was lost. Nevertheless, in February 2005 
the airline acquired new aircraft and added staff and then 
increased capacity and added routes in western Canada, the 
home base of WestJet, Canada's successful version of 
Southwest airlines.  Operating on thin margins even at the 
best of times, that December SNAFU may have put them over 
the edge.  (Financial analysts in February noted that if 
Jetsgo were to drop out as a rival, then WestJet shares 
should receive a significant boost in share price.) 
 
5. The impact on United States' interests will be felt 
second hand, that is by how this event affects Transport 
Minister Lapierre's efforts to generate support for further 
liberalization of air transport services in Canada. We 
anticipate that those who are opposed to further 
liberalization will seize on this opportunity to remark upon 
the need to wait for better times before liberalizing 
further.  On the other hand, officials at the Air Transport 
Association of Canada tell us that they continue to support 
Lapierre's effort and will be linking the failure of Jetsgo 
to the high civair cost structure in Canada, which includes 
high airport rents, the security fee and the fuel excise 
tax. 
 
Cellucci