Greyhound Enters the Race In Canada's Airline Business

Greyhound, that fleet-footed canine so well known to bus travelers across North America, has sprouted wings in Canada.

Using just six refurbished Boeing 727 aircraft, Calgary-based Greyhound Air began flying Monday, sending Canadians a message that they should leave not only the driving, but the flying, to Greyhound.

"We're marking new territory," is the brash new company slogan emphasized by a television advertisement of a greyhound literally marking its turf - the tire of a competitor's aircraft. Greyhound will need that sort of moxie.

Discount carriers have come and gone since Canadian airline deregulation in the early 1980s. But until this year, deep discounts were offered by only a handful of charter carriers - niche players surviving in the shadows of Canada's two big airlines - Canadian Airlines and Air Canada.

Now, two new true discount airlines have emerged: Greyhound and fellow Calgary-based newcomer WestJet, which began flying in February. This has energized a static market.

"All of a sudden Greyhound and WestJet are thrown into the mix" along with the charter airlines, says David Frank, an airline analyst at the International Commercial Centre in Vancouver. "It could really shake up the two big airlines, with their high cost structures."

Together, Canadian and Air Canada control about 85 to 90 percent of Canada's $5 billion (Canadian; US$3.7 billion) airline market. Canadian dominates the West and Air Canada the East. Such dominance has led Canadian, for instance, to charge $1,734 (US$1,265) for a no-advance-purchase, coach, round-trip ticket from Toronto to Vancouver. Greyhound's fare: $348.

Greyhound hopes to funnel through its Winnipeg hub three classes of passenger: business flyers, would-be charter customers, and bus riders from across Canada.

Greyhound really had little choice but to fly. In the West, Greyhound's bus fleet was beginning to lose long-haul passengers to WestJet. And the cost to get into the business was slight - only about $10 million. Greyhound doesn't own any equipment.

Greyhound is partnering with a British Columbia company called Kelowna Flightcraft Air Charter Ltd., which owns and operates the aircraft. Greyhound Canada Transportation Corp. does the marketing and can ticket passengers from its flights onto its buses to 1,100 towns across Canada. By comparison, the large carriers feed their hubs from only 100 or so cities.

SOME analysts say the combination of Greyhound, WestJet, and the charter companies will create a sort of critical mass for major urban centers to get efficient, low-fare service. And that means a new playing field - even for the big boys. Not that either is intimidated.

"We will aggressively compete with them," says Diana Ward, a spokeswoman for Canadian Airlines. "We cater to the business travelers who value their time. But we take any competition seriously. The market, with low-cost competition, is growing, and that's good news for us."

Yet stratospheric prices are falling as the two giants match low fares in selected markets. On the Vancouver-Calgary route, WestJet and Canadian both offer $49 one-way fares.

The low fares have already generated a 23 percent rise in passenger traffic in the Vancouver area, for example. And Greyhound is already filling 75 to 90 percent of its seats and fielding 12,000 calls a day from would-be fliers eager for discounts.

Despite its popularity, Greyhound has already hit its share of turbulence. It stumbled in April, when Ottawa regulators refused to grant an airline license because the company was 68 percent owned by an American company, Phoenix-based Dial Corp. Ownership was transferred to a Canadian company and other conditions laid out to permit operation.

The start-up comes as discount airlines in general are coming under close scrutiny, especially in their main stomping ground, the United States. The US Federal Aviation Administration grounded Atlanta-based ValuJet last month in the wake of a fatal crash.

Still, Greyhound's fares will be a boon to small-town Canadians spread across the world's second largest country. Getting from places like Penticton, B.C., to Thunder Bay, Ontario, will now cost a fraction of what it used to.

"Greyhound is doing something unlike any other airline in the world," Mr. Frank says. "It isn't really getting into the airline business. It is simply replacing some of its long-haul buses with aircraft. It's clear that this is going to bring a lot of far-flung Canadian families closer together."