Maciej Wilk on Canada's airline "curse"
Plus, why there are so many new smashburger shops.
Good evening everyone. In today’s edition, Him & Hers enters Canada, The Peak buys itself back, and why smash burgers are everywhere. But first, Flair Airlines CEO Maciej Wilk answers your questions.
Office Hours is a new weekly series where Milk Bag, along with its readers, interview the people who are driving Canadian business and culture.
“I think a good place to start is with a Richard Branson quote that I’ve heard you reference in interviews before, which is that the fastest way to become a millionaire is to be a billionaire and invest in an airline. Why is it such a difficult business?” - Milk Bag
This quote is one of my favourites, and it’s very true. It’s a capital intensive business. You need about 20 to 30 of these birds, each costing $40 million, so very quickly you’re talking about billions needed in investment. It can also be unfair in the sense that we’re the only entity in our industry facing customers, but we depend on a number of providers between the airports, navigation services, aircraft lessors, ground handling agents, maintenance providers, fuelers… I can go on and on. Everyone in this value chain has a fantastic business with decent profits, and airlines are the very last ones and ending at a 5% margin. And that’s if you’re a rock star, because global averages are far below this, and many airlines continuously lose money.
“Why is air travel so expensive for Canadians? It’s almost the same price to travel to Europe as it is to travel domestically.” - Vik
The first thing is that air travel is heavily taxed in Canada, starting with 5% GST applied on domestic air travel. The second is our airport fees are some of the highest in the world, mostly due to land fees paid by airports, to the government, to use the land. Unlike in Europe, there’s no way to challenge when airports increase their fees. The third is that roughly three-quarters of the domestic market in Canada is controlled by a duopoly, with all of the negative consequences, meaning higher prices. A few years ago, it was 80% and you may remember prices back then. In a recent report, the Competition Bureau confirms that fares fall by more than one-tenth, on average, when Flair enters a market.
“Why did you leave LOT, Poland’s national airline, to take this job?” - Milk Bag
Canada is one of the last countries to witness the low cost flying revolution we’ve seen, especially across Europe, over last 30 years. It’s held in this iron grip of the airline duopoly, and I figured it would be a great challenge to come and try to lift the curse. On a personal level, it was a good time. My wife and I came here with a six-month-old, and we love it in Vancouver.
“If you could do one thing—money is no object, nor is feasibility—how would you improve air travel?” - Tatum
Certainly I would add more aircraft to our fleet. It is a tough time to grow an airline, because the market globally is facing significant challenges in terms of aircraft availability. Most of us are aware of the challenges that Boeing faces following the grounding of the 737 Max fleet, and then the increased supervision of the FAA over the production process. It all ends up with Boeing cutting production and deliveries being delayed. On the other hand, there is a crisis going on right now with the Airbus A320 Neo fleets, with flights grounded because the engines are in repair. This results in airlines extending their leases and not letting older aircraft onto the market, which is highly frustrating to me. But we’re not surrendering, and we have ideas. If money was not an issue, I would also bring WiFi on every aircraft. Installing Starlink, for example, would immediately add a couple of dollars to every ticket.
“Flair has captured price-sensitive travellers with its ultra-low base fares. However, the ‘value-based’ model relies heavily on ancillary revenue from seat selection, baggage, and priority boarding. With increasing competition from both ultra-low-cost carriers and the new ‘basic economy’ fares from major airlines, how do you plan to evolve your fare structure to maintain a clear value perception without falling into the trap of fee fatigue that can erode customer loyalty and trust? Specifically, are you exploring bundled ‘sweet spot’ fares to simplify choices for customers while protecting your ancillary revenue?” - Mike
Fantastic question. We will introduce new bundles early next year to better show their value, and yesterday we launched Flair Express, which gives customers with a carry-on a frictionless experience, particularly around sizing bags. Trust me, I know this has been a major source of friction, but please understand our business model relies on offering incomparable base fares that allow people to literally fly from point A to B for $40, $60, but it’s not possible to include everything in that fee. We’ve been so bloody strict, but it’s time for us to cut people some slack. With other airlines unbundling, I would still argue our product is superior, because other ultra-basic fares can be highly punitive and a worse experience.
“Will you ever market in the same way that Ryanair does? It seems like you’re trying to achieve similar things. I think what they post on social media is insane.” - Chris
Ryanair is known for mocking customers on social media, so we would not do this. We follow the same pricing philosophy, but we operate in different environments. We certainly copy what’s appropriate for Canada.
“With larger airlines making so much money off of their loyalty programs, how does Flair make money differently?” - Cara
Most of the key players in North America draw a significant part of their profits from credit card programs that they run together with the banks. Our market segment does not want another credit card, they want the lowest price possible. We do not compete against Air Canada. We do not compete against WestJet. We compete against the couch, meaning we want to offer people more opportunity to fly. We will introduce a loyalty program, but it will likely be a subscription program for frequent flyers.
“Is achieving the low fares we see in Europe actually possible given how spread out Canada is, and will we be able to one day fly across the country for, say $100?” - Patrick
Canada is basically the size of Europe with about a tenth of the population, and the distribution is very unique, like a thin layer along the U.S. border. There was a misconception among carriers, and frankly, Flair in the past, that you could copy and paste the European ultra-low cost carrier (ULCC) model onto Canada, which isn’t possible, because 80% of the domestic market is 10 or 12 cities. We’re adjusting this model to work in Canada, and one example is questioning a rule that pilots can’t sleep outside their base. This impacts efficiency, but you can’t insist on flying between Edmonton and Winnipeg in January, when demand is limited, when you could fly to Cancun. I’m sad to say that unless something fundamentally changes in the regulatory environment, we won’t be able to see a sustainable $100 fare between Vancouver and Toronto, simply because the cost basis is too high. There are a number of things that could be changed pretty easily if there was a will to make air travel more affordable.
“Flair’s brand is around affordability, but people sometimes don’t love to admit they’re price sensitive. How does that impact how you will build this airline?” - Hannah
I think it’s important to be smart about how you spend your money, and I don’t think you need to build your sense of uniqueness by flying with a so-called premium airline. I invite everyone to choose the most affordable and reliable air travel option, and then spend your money at your destination.
This interview has been edited for clarity and length.
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I called Mert Oztop from Burger Republic to talk about all the new smash burger shops in Toronto. Oztop tells me he used to spend “a lot” of money on McDonald’s hamburgers and hopes to re-introduce an elevated concept made with local ingredients to a generation that grew up eating dry, sometimes even burnt hamburgers. Along with The Burger Shop at Ossington and Queen, and the new Two Hands Burger at College and Montrose, the explosion of smash burgers seen in the U.S. and the U.K. last year seems to be trickling into the downtown core. A recent Eater analysis called the “ubiquity of smash burgers” a sign that people are looking for both familiarity and the best value.
Starbucks is paying 53 baristas to post ‘work content’ as part of a new creator program. I’m personally more interested in hearing work stories from the employees who would be paid not to post.
The Peak bought itself back from ZoomerMedia. In June 2023, The Peak became one of the country’s biggest (and, I think, still wildly underrated) media success stories after selling to the company for $5 million. Around that time, Zoomer had spent around $45 million to acquire several digital media brands—including BlogTO, Daily Hive, and Curiocity—to broaden the demographics of its mostly-boomer audience. Having worked with Brett Chang, Taylor Scollon, and Alex Blumenstein for nearly four years, I can tell you we should be excited about where they take this next.
Yet another unrealistic career expectation. If you didn’t make the Forbes 30 Under 30 list this year (Carly Jordan was featured in Milk Bag first) you can always try getting inducted into the Canadian Business Hall of Fame.
U.S. telehealth provider Him & Hers is angling for a share of the Canadian weight-loss drug market. CEO Andrew Dudum told The Globe and Mail a mostly overweight population and a “massive public health crisis” (nice) presents an opportunity for when generic versions of the drugs become available next year.
2025 has been a great year specifically for challenger banks. The firm behind EQ Bank is buying PC Financial, best known for its PC Optimum loyalty program and PC Mastercard, from Loblaw for about $800 million. Reading the fine print, looks like Loblaw will get a 17% stake in EQ Bank.