I’ve written before about Connect Airlines, an airline startup that intends to fly Bombardier Q400s from Toronto Billy Bishop City Airport (YTZ) to destinations in the United States. The airline is essentially trying to replicate what Porter Airlines has done out of the airport.
While Connect Airlines is a couple of years late with launching operations, the airline claims to be on track to start commercial flights before the end of 2023. And to add some credibility to the concept, it looks like American Airlines is not only planning on partnering with the airline, but also plans on investing in it?!
In this post:
Connect could get American investment & partnership
Going back as far as 2021, Connect Airlines stated that it planned to have a partnership with American Airlines, meaning there would be reciprocal points earning and redemption opportunities, along with the potential for a codeshare agreement.
This announcement came from Connect Airlines’ side, so it was anyone’s guess how legitimate those claims were. Well, as it turns out, there could be more than just a partnership between the two airlines.
As first reported by Seth Miller, in a recent Department of Transportation (DOT) filing, Connect Airlines revealed that “a major U.S. airline will become a shareholder in Connect with the stated intention of taking a larger position over the next three years.”
This investment will reportedly come after the airline receives FAA approval to operate, because at that point, the company plans a $40 million Series B equity raise to fund its operation. It sounds like American Airlines will be part of that.
Suffice it to say that having a partnership with American and even an equity investment from American gives the carrier a huge amount of legitimacy, compared to, say, Global Airlines.
What does American gain from Connect?
Competitively, I can see why American would be interested in investing an airline that has something to do with Canada, since it’s a country where American lags its competitors:
- United and Air Canada have a joint venture for transborder flights, and both airlines belong to the Star Alliance
- Delta and WestJet have a partnership, and while the airlines called off their joint venture, they still partner
- American is the only one of the “big three” US airlines that doesn’t have a partnership with an airline primarily operating to or from Canada
While I absolutely think Connect Airlines is a “legitimate” startup, I’m skeptical of the carrier’s chances of success:
- The airline is doing nothing unique, and is just copying Porter Airlines’ business model; just copying what someone else is doing with no innovation rarely leads to long term success
- The carrier’s business model is basically entirely dependent on a single airport, and on the growth of Toronto as a business market
- While Q400s are capable planes, they don’t exactly have the best per-seat operating costs; furthermore, with the pay that airline pilots expect nowadays, labor costs in the industry are much higher than before (even if the pilots and flight attendants will be based in Canada)
So I’m not saying American is wrong to be interested in investing in an airline associated with Canada, but it just seems like a kind of odd place for American to dabble, and like there’s limited upside. Does American actually think the airline will be independently profitable? Or does the airline think the traffic that will connect into American’s network through Connect Airlines’ service is that valuable?
To Delta’s credit (hi, Tim!), the airline has a rather cohesive investment strategy, even if it backfires at times. The airline invests in major global airlines that it plans to launch joint ventures or strategic partnerships with, so that it can both benefit from the upside of the other airline, and also have some control. Delta has stakes in Air France-KLM, China Eastern, Korean Air, LATAM, and Virgin Atlantic.
Meanwhile American has invested in China Southern, GOL, JetSMART, and soon… Connect Airlines? I suppose that’s exactly what you’d expect, though, because if American had a cohesive strategy, it wouldn’t be American, right?
I also can’t help but point out the hilarious cycles airlines go through. Years ago, American Eagle (American’s regional subsidiary) retired all turboprops, because they’re inefficient. Now the airline may invest in an airline with a business model entirely dependent on these planes.
Bottom line
Airline startup Connect Airlines is hoping to launch flights by the end of 2023, flying Bombardier Q400s from Toronto Billy Bishop City Airport to destinations in the United States. I’d say it’s an interesting business model, except the airline is simply replicating exactly what Porter Airlines has done.
American Airlines is reportedly planning on investing in Connect Airlines, in addition to having a partnership with the airline. I’m not totally sure I get the upside here, as the value of this seems rather marginal, in my opinion. But I guess American wants some Canadian(ish) partner, so views this as being better than nothing.
What do you make of American Airlines investing in Connect Airlines?
Porter flies to United (IAD, EWR), Delta (BOS), Jetblue (BOS), Southwest (MDW), and Frontier (MDW) but strangely does not have any connection with American (LGA, JFK, PHL, ORD, DCA, CLT). Connect would fix this.
Connect was stopped by the FAA twice for serious safety issues. Their history speaks for itself as does it’s owner and management team. Connect should never be allowed to fly a single aircraft ever again. That Smart Start Captain pay was a scam. John Thomas has a poor history.
I can see CM worrying if this Airline decides to call its loyalty program 'ConnectMiles'
What not just link up with Porter? They are growing and adding jets too plus they serve more than just Toronto,
You give Tim Dunn a big shout out, and he doesn't write anything. How disappointing! LOL!
Was thinking the same thing...hope he's okay!
There are so many absolutely hilarious things here:
First of all, when a small or non-existant start up talks about hydrogen or electric planes, you know it all a scam.
Can you see the hydrogen fueling facility at Billy Bishop?
Then Connect says they're going to buy 75 ATR's retrofitted to hydrogen.
There isn't a snowball's chance in hell that will ever happen. That would take a complete re-engineering of the plane and there's no...
There are so many absolutely hilarious things here:
First of all, when a small or non-existant start up talks about hydrogen or electric planes, you know it all a scam.
Can you see the hydrogen fueling facility at Billy Bishop?
Then Connect says they're going to buy 75 ATR's retrofitted to hydrogen.
There isn't a snowball's chance in hell that will ever happen. That would take a complete re-engineering of the plane and there's no way on God's green earth that a 1980's technology plane, with 1980's manufacturing precesses is going to be completely re-certified.
All that aside, if AA is going to take an "equity stake" in Connect (or is it Waltzing Matilda), at what point does the pay scales for the pilots of the other regionals that AA come into play?
I suspect that the reason AA is interested is that Connect will buy AAdvantage miles from AA.
I wish they would fly from YUL. We need more competition on YUL-NYC....
The market suggests otherwise.
So is AA investing in Waltzing Matilda?
I legitimately LOL*d at the “hi, Tim!” comment. It’s your ability to work humor into analysis and travel stories that I love so much.
I’m sorry, I did not get the reference. The only Tim I know on OMAAT is Tim Clark of Emirates. Anything I’m missing?
Tim Dunn is the resident Delta fanboy on this comment page as well as numerous other travel blog sites. DL can do no wrong in his eyes.
@Mark
I completely agree.
I assume AA has already had discussions with Porter that went nowhere? With their expansion into regional jets they’d seem like a much more logical partner. AA could have connecting traffic at YYZ.
You are right. But AA wouldn't be AA if they were to do the logical thing.
1) if Connect gets off the ground, curious if it eventually gets Eagalized,
2)it is trying the Porter model that Porter is moving away from as they move to E2s, plus a tie up with AA is potentially something that could provides a steady value, though wouldn't expect massive success
3) AA didn't retire the props for efficiency, on a large number of short routes out of CLT/PHL/LGA would definitely have a cost advantage...
1) if Connect gets off the ground, curious if it eventually gets Eagalized,
2)it is trying the Porter model that Porter is moving away from as they move to E2s, plus a tie up with AA is potentially something that could provides a steady value, though wouldn't expect massive success
3) AA didn't retire the props for efficiency, on a large number of short routes out of CLT/PHL/LGA would definitely have a cost advantage versus regional jets. But the Dash-8 that remained were starting to reach end of life on cycles and there is a consumer preference against props that may show up on the revenue side (never seen definitive confirmation of that though)
Turboprops aren't "inefficient", though some of the much older ones that American Eagle used to operate may have been. They're pretty attractive on a cost basis, but the US airlines have shied away from them due to reliability and customer perception concerns. Without a direct replacement for the CRJ700/900 and E170/175 available or in the offing (the E2-175 has too high an MTOW for current regional carrier scope clauses), it wouldn't be surprising if we...
Turboprops aren't "inefficient", though some of the much older ones that American Eagle used to operate may have been. They're pretty attractive on a cost basis, but the US airlines have shied away from them due to reliability and customer perception concerns. Without a direct replacement for the CRJ700/900 and E170/175 available or in the offing (the E2-175 has too high an MTOW for current regional carrier scope clauses), it wouldn't be surprising if we see turboprops make a comeback with at least one of the big US carriers in the near future.
Bgriff is somewhat on the right track. Passenger perception was a key driver for Delta competitors feeling compelled to react to the introduction of RJs by defunct Delta Connection carrier Comair during the early 90s. The DL/OH partnership gave DL a valuable head start in scaling RJ usage across the DL network via CVG.
AMR was somewhat of a late adopter of RJs due to pilot contact restrictions ("scope" clause(s)) with ALPA (AA Eagle...
Bgriff is somewhat on the right track. Passenger perception was a key driver for Delta competitors feeling compelled to react to the introduction of RJs by defunct Delta Connection carrier Comair during the early 90s. The DL/OH partnership gave DL a valuable head start in scaling RJ usage across the DL network via CVG.
AMR was somewhat of a late adopter of RJs due to pilot contact restrictions ("scope" clause(s)) with ALPA (AA Eagle pilots' union). Eventually, AMR received the contract relief required to induct RJs. AMR also managed to subvert the scope clause by convincing Embraer to produce the seat capacity busting EMB-135.
Mr Schlappig is also correct that T-props "became inefficient", though through rote of FAA rulemaking. On that front, there were three changes in FAA rules that made operating T-props less and less lucrative:
(1) The mid 90s change for commuter/regional air carriers being certified to operate under the old FAR 135 rules to mandating operations under FAR 121 rules. That change made certain training requirements, aircraft equipage, and aircraft maintenance routines more expensive.
(2) In the wake of the 2003 crash of an Air Midwest B-1900 at CLT, the FAA mandated changes to weight and balance calculations. These changes were particularly pernicious for commuter turboprop operators as those aircraft types became restricted to a maximum of number of passengers below the actual seat count of a given T-prop commuter type.
(3) Finally, the 1500 hour rule (in the wake of the Colgan Air crash at BUF in 2009) in part made recruitment of flight crew for regionals more difficult, and made the existing pool of qualified flight crew more expensive.
I agree- not hard to imagine Connect operating several flights per day to some combination of ORD, PHL and/or DCA to feed AA's network plus serve business/government-related traffic.
maybe but not to National (DCA) no US Customs there - it will need to be Dulles (IAD) exactly like Porter since there is no US Customs office at Bishop (YTZ) unlike Pearson (YYZ)
Thanks for correcting this- doubt IAD will be involved since that's UA's hub, so maybe substitute JFK if AA is willing to loan a few of its slots.
It was recently announced that US pre-clearance is coming to YTZ by 2025.
Billy Bishop is getting US CBP Pre-Clearance in 2025.
https://www.portstoronto.com/portstoronto/media-room/news/us-cbp-preclearance-coming-to-billy-bishop-toronto.aspx
Much like Delta with REX, I suspect that AA was motivated as much by, they're the only plausible remaining option in the market.