BEDFORD, MA- Connect Airlines (MW), a new American regional carrier, has established a memorandum of understanding with a prominent U.S. airline for commercial collaboration.
This partnership, subject to Connect Airlines concluding its forthcoming round of fundraising, holds the potential to evolve into a significant equity investment.
American Connect Airlines Partnership
The identity of the “major U.S. airline” remains undisclosed in a communication from the legal advisor representing Waltzing Matilda Aviation, the charter operator that owns Connect Airlines, reports Airline Weekly.
The letter, sent to the Department of Transportation on August 4, refrained from explicitly naming the U.S. airline. However, prior submissions to the regulatory body during the airline’s certification process have identified American Airlines (AA) as Connect’s designated commercial partner.
This alignment is anticipated to come into play as Connect initiates revenue-generating flights linking Toronto’s Billy Bishop Airport to America’s Chicago and Philadelphia hubs. PaxEx.Aero flagged the prospect of this investment.
Among the major U.S. carriers, the American airline stands as the sole entity lacking a partnership for Canadian routes. Delta Air Lines (DL) has established codeshare agreements with WestJet (WS), while United Airlines (UA) has formed a joint venture with Air Canada (AC).
Connect’s ability to formalize a commercial arrangement with American Airlines, or any other significant U.S. carrier for that matter, hinges upon the successful attainment of full operational certification.
Although the Department of Transportation (DOT) certified Connect for interstate scheduled air transportation in July 2022, the process remains incomplete until the U.S. Federal Aviation Administration grants the airline its air operator certificate.
This delay in securing FAA certification has prompted Connect to petition the DOT for an extension to its initial startup deadline, requesting an extension from October 5 to December 31. The airline had initially aimed to commence revenue flights as early as 2021.
Raised $2.6 Million Investment
Connect Airlines has secured a minimum of $2.6 million in capital through investments from notable backers, including Par Capital, a firm with holdings in a diverse range of travel companies spanning Expedia to SkyWest Airlines (OO) and Southwest Airlines (WN).
William Flynn, Chairman and former CEO of Atlas Air, has also contributed to this investment. As part of their plans for the inaugural year of operations, Connect intends to raise an additional $40 million in Series B funding, with Raymond James facilitating this funding round. The airline’s partner will also partake in the Series B fundraising initiative.
Amidst the post-pandemic landscape, Connect is one of several newly established airlines striving to carve a niche in the U.S. aviation sector. Notable among these ventures are Avelo Airlines (XP), led by former executives from Allegiant Air (G4) and United Airlines, such as Andrew Levy, and Breeze Airways (MX), founded by JetBlue Airways (B6)’ originator David Neeleman.
These airlines commenced operations in 2021 and have experienced steady expansion since their inception. Conversely, certain initiatives, such as the relaunch of ExpressJet Airlines as Aha!, encountered less favorable outcomes and ceased operations shortly after their debut.
Historically, times of crisis have proven opportune for launching airlines. Established players often shift into a defensive mode, reducing their workforce, aircraft inventory, and airport facilities in a bid to curtail losses and maintain operations.
This dynamic creates a window of opportunity for new entrants to establish themselves cost-effectively, gaining access to markets that might otherwise be challenging to penetrate.
Nevertheless, the federal assistance received by U.S. airlines during the Covid pandemic enabled them to preserve a significant portion of their workforce and avert many of the service reductions they would have otherwise faced.
This, in turn, preserved several barriers to entry for aspiring startups.
Connect wants to Connect U.S and Canada
Connect Airlines does not aspire to disrupt the competitive landscape in major metropolitan areas like New York or Los Angeles.
Instead, as previously mentioned, it focuses on enhancing connectivity between Toronto Billy Bishop Airport and the broader U.S. airline network through a strategic partnership, particularly with American Airlines.
While Porter Airlines, the incumbent operator at Billy Bishop, serves four U.S. cities (Boston, Chicago Midway, Newark, and Washington Dulles), it lacks extensive collaborations that enable travelers to connect beyond these gateway destinations seamlessly.
The unique characteristic of Billy Bishop Airport adds a distinctive dimension to the situation.
Positioned on an island within Lake Ontario, opposite downtown Toronto, it is exclusively accessible to turboprop aircraft, such as the De Havilland Dash 8-Q400, utilized by both Porter and Connect Airlines. It is noteworthy that no major U.S. carrier currently operates turboprop feeder airlines.
Connect Airlines’ perspective revolves around expanding beyond merely offering flights to destinations like Chicago or other U.S. points. Their goal is to establish a comprehensive one-stop connection into an expansive network.
As stated in 2021 by Thomas, “Our focus is on providing more value than just a flight to a single U.S. city; we intend to present Toronto residents with a significantly enhanced value proposition.”
In addition, after its launch, Connect is actively collaborating with Universal Hydrogen to pioneer the utilization of hydrogen fuel cell-powered aircraft, aiming to establish itself as one of North America’s inaugural “emission-free” airlines.
Bottom Line
American Airlines has a history of equity investments in partner airlines. The carrier owns its three largest regional affiliates, Envoy, Piedmont Airlines, and PSA Airlines.
Furthermore, it holds ownership stakes in Latin American partners JetSmart and Gol. Notably, American Airlines even holds a minor ownership share in China Southern Airlines.
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