Canada Jetlines targets low-cost airspace with order for Boeing 737s

Canada Jetlines Ltd., a new airline that plans to begin operating in Canada in 2015, has signed an order to buy five Boeing Co. planes and says it may order as many 21.

The airline, which is in the midst of an initial public offering that is designed to raise $50-million, said the deal involves firm orders for five Boeing narrow-bodied 737 airplanes and purchase rights for an additional 16 aircraft. The purchase of five planes would cost the airline $438-million (U.S.) at Boeing's current list price of $87.7-million each.

"This agreement with Boeing is a major milestone for Jetlines," the company's chief executive Jim Scott said in a statement.

Canada Jetlines said in a prospectus for the IPO that $13-million (Canadian) of the $50-million it is trying to raise through the IPO will be spent as a down payment on the new planes.

It plans to start operations next year with leased Boeing 737 planes and increase the size of its fleet to eight planes by 2016 if demand warrants.

A market exists in Canada for an airline with revenue-per-available-seat-mile of 10 cents, compared with Air Canada's 18 cents and the 16 cents generated by WestJet Airlines Ltd., the prospectus said.

Base airfares are scheduled to be 30- to 40-per-cent lower than those offered by Air Canada and WestJet, the document said.

The plan is to fly mainly between Vancouver and destinations not now being served by major carriers.

Flights from Vancouver to the B.C. cities of Prince Rupert and Prince George, as well as Fort McMurray, Alta., Saskatoon, Regina and Winnipeg are targeted, according to documents filed with securities regulators.

The documents also point to unspecified destinations in the United States and Mexico.

The airline's model is based on so-called ultra-low-cost carriers that charge cheap fares, but also generate revenue through baggage fees, charges for seat selection and in-flight meals.

Low fares and new destinations will attract customers who are discouraged from flying because of high airfares and

the lack of jet service to some Canadian cities or are flying out of U.S. airports near the Canadian border on low-cost United States airlines, the regulatory filings said.