How $4.8M in provincial money got Winnipeg's direct flight to La La Land in the air

The new, government-subsidized Westjet connection between the Manitoba capital and Los Angeles has been "well-received" since its launch last fall, a provincial official says, but both the airport and the airline are keeping passenger numbers under wraps.

On Oct. 31, Westjet began offering direct air service between Richardson International Airport in Winnipeg and Los Angeles International Airport three times a week. Return fares on the new route range from $385 to $921, according to Google Flights.

The Winnipeg Airports Authority subsidizes the route with the help of $4.8 million worth of provincial funding aimed at bringing more direct flights to Winnipeg from international destinations. Disruptions to air travel during the pandemic saw Richardson lose direct connections to several cities outside Canada, including Chicago, Denver and London, England.

"It's obviously no secret the aviation industry was badly hit during the pandemic. We've lost a lot of connectivity," Winnipeg Airports Authority president and CEO Nick Hays said during an interview in August after the provincial funding was announced in conjunction with Economic Development Winnipeg.

"It helps us to compete on a level playing field and compete for those routes and attract those new destinations."

Prior to the creation of the YWG-LAX route, Los Angeles was one of the two most popular U.S. destinations for outbound Winnipeg passengers that was not served by a direct flight. The Winnipeg film industry lobbied hard for years for the LAX connection, arguing direct flights could help bring more Hollywood productions to the province.

The subsidy for the flight is not a fixed infusion of cash. Instead, it's based on a formula that factors in passenger volumes, ticket prices, fuel costs and other expenses as part of a formula designed to ensure the flight is profitable while it becomes established enough to sustain itself without a subsidy, says Michael Swistun, the secretary to Manitoba's Economic Development Board.

"It really is more of a backfill," Swistun said in an interview last week, adding the $4.8-million kitty will only be used to subsidize the LAX flight as much as that's required by a formula put together by both parties.

"The ideal for both us and the airline is that it doesn't get touched and then that [money] can get reallocated to other routes."

The deal has a three-year term, but is not guaranteed to last that long. All parties will assess the flight every six months, Swistun says.

"If this thing falls really flat on its face, neither the airline nor the airport authority or Economic Development Winnipeg are interested in continuing to fund a loser," he said. "Everybody could be better off reapplying that asset somewhere else."

Michel Rosset, a spokesperson for the Winnipeg Airports Authority, says the flight is doing well.

"In talking with travellers, members of the communities across the region we serve and our airport partners, the non-stop route between YWG and LAX has been well-received since it launched at the end of October," Rosset said, deferring questions about passenger volumes and flight occupancy ratios to Westjet.

The airline declined to provide those figures.

John Gradek, a lecturer in aviation management at McGill University in Montreal, says while airport subsidies are becoming increasingly more common in North America, they usually don't involve direct financial help for airlines.

"The traditional way of doing these things is to pay for the advertising programs," Gradek said, explaining that some airports land flights by promising to cover the marketing costs. "That is the model preferred by by airports, rather than money going directly to the airline."

Determining whether any particular flight is profitable can be difficult, Gradek says.

"The cross-subsidization of losses is pretty tricky because you have no oversight and no clue in terms of what … the airline is in fact declaring to you as its losses," he said. "You've got to be really careful in terms of understanding the accounting principles that are being used to identify losses.

"The U.S. has gone through many, many battles with their own carriers on routes where they've had to have mandatory service."

Flight subsidies can be tricky

Airports also have to ensure flight subsidies don't jeopardize business by leading competitors to pull up stakes, Gradek says.

"You have to be very careful in terms of understanding the current base that you have at your airport, and making sure you're not cannibalizing existing services."

For example, it might now be less likely for Winnipeg-Denver service to resume now that the Manitoba capital is served by a Los Angeles flight, as Denver used to be a hub for travellers bound for the U.S. southwest.

At the same time, the post-pandemic travel environment makes direct flights more appealing than ever, Gradek says.

"If there's one thing the last four or five months worth of chaos in the Canadian aviation market has proven, it's that you want to stay away from hubs as much as you possibly can. Eliminate the connection and fly nonstop, if you can."

Swistun says the Winnipeg Airports Authority is trying to obtain more connections.

In the summer, the airports authority identified New York City as the most popular U.S. destination for outbound Winnipeg travellers. However, expensive landing fees in New York likely make a direct Winnipeg connection unfeasible economically due to the high passenger volumes that would be required to make that route profitable, Swistun says.

Other U.S. destinations on Winnipeg's radar include Hawaii, San Francisco, Chicago and the Miami-Fort Lauderdale area, WAA vice-president Tyler MacAfee said in August.

The top Canadian desitnations unserved by direct flights from Winnipeg are Victoria, B.C., London, Ont., St. John's, N.L. and Quebec City, MacAfee says.

The top international destinations for Winnipeggers are Manila, London, U.K, Delhi, Beijing and Amsterdam, he says.