High living costs 'jeopardizing' financial security of renters, mortgage owners: survey

Daniel Johnson , BNN Bloomberg\

A new survey says that Canadians, particularly those with rent or mortgage payments, are delaying retirement savings to deal with higher living costs. 

The new survey from Co-operators, released Tuesday, found that higher living costs had a larger impact on renters saving for retirement. In total, 77 per cent of renters indicated they either have not yet started saving for retirement or have not saved as much as they had planned. More than half of respondents with mortgage payments, 51 per cent, indicated they had saved less than planned for their retirement. 

“Canadians are facing a precarious and challenging situation as they try to prioritize their spending. As a result, many are putting their retirement at risk, especially those who pay a mortgage or rent,” Rob Wesseling, the president and CEO of Co-operators, said in the release. 

“This is a clear signal that today’s economic strain is jeopardizing the long-term financial security of most Canadians.” 

The survey found homeowners without a mortgage found it less difficult to accumulate retirement savings, with 76 per cent indicating they have met their retirement savings goals, the survey found. Additionally, 32 per cent of respondents in that demographic indicated they have exceeded their retirement savings expectations. 

More than half of homeowners without a mortgage, 57 per cent, said they believe their registered retirement savings plan (RRSP) and savings will be sufficient to fund their retirement. However, the survey found that only 28 per cent of mortgage owners and 22 per cent of renters believed their savings and RRSP would be enough to cover their retirement costs. 

“These survey results show that Canadians are facing a tough choice – paying for living expenses today or putting some money away for tomorrow,” Jessica Baker, the executive vice-president of retail wealth at Co-operators, said in the release. 

Amid higher living costs, 43 per cent of renters and 23 per cent of mortgage owners indicated in the survey that they are unsure about how they will fund their retirement. Meanwhile, 13 per cent of mortgage-free homeowners face uncertainty about funding their retirement plans. 

Methodology:

Results were derived from an online survey with 1,500 participants across Canada between Jan. 24 to Jan. 30. 

Most Canadian mortgage owners concerned about payments, survey finds

Mitchell Consky, BNN Bloomberg

Canadian homeowners are struggling with an increase in mortgage costs as interest rates surge. (Photographer: SeongJoon Cho/Bloomberg)

A new survey found the majority of homeowners share concerns about making their mortgage payments due to increased interest rates.

According to the data from Ratehub.ca, 67 per cent are worried about paying their mortgage once their next renewal comes up, while 69 per cent of homeowner respondents reported that their mortgage has been generally more challenging to pay in the last two years. 

The survey also found that homeowners made major shifts in their financial decisions to compensate for the higher interest rate environment. 

Penelope Graham, director of content at Ratehub.ca, says homeowners continue to look for numerous options to mitigate the impact of the challenging rate environment. 

“It’s evident that mortgage holders facing a more challenging rate environment (and) upon renewal are exploring options to mitigate the impact – notably, nearly 29 per cent say they plan to refinance their mortgage loans,” she said in a statement sent to BNNBloomberg.ca. 

The data found that 24 per cent of surveyed homeowners considered downsizing their home, while 29 per cent considered refinancing their mortgage. Other major decisions included tightening other areas of their budget (54 per cent) or considering a switch to an alternative lender to help cover costs (17 per cent).

“This can prove to be an effective way to offset higher rates, either by switching to a lender with more favourable term features, extending their amortization, or pulling out built-up equity in order to help with higher monthly payments,” Graham said in the statement. 

She added that higher mortgage rates are “reducing borrowers’ spending power.” 

The survey found that the majority of respondents (65.1 per cent) have a fixed mortgage rate, while 34.9 per cent have a variable mortgage rate. 

Rateshub.ca also reported that 62.6 per cent of respondent homeowners will get a fixed mortgage rate at renewal, and 37.8 per cent will get a variable mortgage rate. 

“Fixed mortgage rates continue to be the most common choice for borrowers, even as rates have soared since early 2022,” Graham explained. “This reflects borrowers’ desire for stability in a volatile marketplace, even as expectations grow for lower variable rates in the near future.”

Methodology: 

Ratehub.ca’s 2023 Mortgage Survey of 2,651 adults was conducted December 3, 2023 - December 31, 2023 by Ratehub.ca. Adults 18 years of age and older residing in Canada were surveyed using an online research panel method across a combination of desktop, mobile and tablet devices.

Rising loan delinquencies bring pain to BMO, Scotiabank results

Christine Dobby, Bloomberg News

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Earnings at Bank of Montreal and Bank of Nova Scotia were marred by increasingly cash-strapped consumers and businesses amid a challenging economic landscape.  

The two Toronto-based banks — the first of the big Canadian lenders to report fiscal first-quarter results — diverged in their results, with BMO missing estimates on lower capital-markets, insurance and corporate-services revenue and Scotiabank topping expectations. Still, both lenders set aside more money for potentially bad loans as higher interest rates continue to hurt credit quality, with missed payments beginning to mount.

Scotiabank’s provisions for credit losses rose to $962 million (US$713 million), more than the $922 million expected by analysts, while BMO’s provisions totaled $627 million, far more than the $514.2 million forecast.

Scotiabank pointed to higher impaired provisions in its international business as well as for Canadian auto loans and unsecured lines of credit, while BMO detailed an increase in impaired provisions for consumer loans, credit cards and business and government loans. 

“Higher delinquencies across most of our retail portfolios this quarter reflect the challenging macroeconomic environment,” Phil Thomas, Scotiabank’s chief risk officer, said on a conference call with analysts. 

His counterpart at BMO, Piyush Agrawal, said the ongoing impact of tighter monetary policy is to blame for an increase in impaired loan provisions.

“Consumer loan losses, in both Canada and the U.S., reflect higher delinquencies in credit cards and other personal loans, reflecting increases in customer insolvencies, which in Canada are now above pre-pandemic levels,” Agrawal said.

Still, executives at both lenders said they continue to see the credit situation as manageable for their Canadian clients, noting that many households still have savings to draw on and have trimmed their discretionary spending.

Clients whose mortgage payments have already gone up “are selectively choosing to prioritize those payments,” BMO Chief Financial Officer Tayfun Tuzun said in an interview. “That’s the reason why I think, in some segments, you are seeing higher card delinquencies, and spend levels are also declining.”

An eventual lowering of interest rates by both the Federal Reserve and the Bank of Canada as soon as this year should ease pressure on consumers, Tuzun said.

“But, in the meantime, we will probably be in this environment where delinquencies will be a bit higher,” he said.

BMO shares fell 4.6 per cent to $120.99 at 2:10 p.m. in Toronto after earlier slumping as much as 5.8 per cent, their biggest intraday decline since December 2022. Scotiabank shares climbed 3 per cent to $65.81.

On the mortgage front, soaring interest rates led to a wave of ultra-long home loans in Canada, hitting borrowers who have fixed monthly payments but variable interest rates. Many of those clients are no longer paying down any principal, extending the length of time it would take to repay their loans. When homeowners go to renew their mortgages, typically after five years, they are expected to face significantly higher payments.

BMO said Tuesday that clients with so-called negatively amortizing mortgages have dropped to 24.7 per cent of the bank’s book in the first quarter from 32.4 per cent a year earlier.

Scotiabank doesn’t allow for negatively amortizing mortgages, but said Tuesday that its customers with variable-rate home loans have already seen an average increase in monthly payments of more than 50 per cent since the Bank of Canada began its rate-hiking cycle in early 2022. 

 

Identity, mortgage fraud on the rise as economic pressures mount: Equifax survey

The Canadian Press

A monitor displays Equifax Inc. signage on the floor of the New York Stock Exchange (NYSE) in New York, U.S., on Friday, Sept. 8, 2017. , Photographer: Michael Nagle/Bloomberg

A new Equifax Canada survey finds people are increasingly worried about a potential rise in fraudulent activity as economic pressures build. 

"Any time you see financial stress or an economic downturn, inevitably ... the motivation to commit fraud increases," said Cherolle Prince, Equifax Canada’s head of fraud and identity management consulting.

While overall fraud rates have slightly declined from a 2022 peak, identity fraud has surged. It now accounts for roughly three-quarters of all fraudulent applications across all sectors in the fourth quarter, up from about 65 per cent the previous year, the credit reporting firm said.

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Prince said fraudsters tend to take advantage of economic vulnerabilities, by applying for more credit or taking on various identities to borrow more money from financial institutions. The survey found identity fraud was most pervasive in the banking sector. 

Equifax Canada also says fraud is on the rise in mortgage applications — up 9.9 per cent in the fourth quarter, compared with the same period in 2022 — with Ontario seeing the highest amount.

Prince said first-party fraud — where a person provides false information — is becoming more common because people want to qualify for a house purchase they may not be able to afford.

She added the company has also seen a slight rise in true-name fraud, where someone steals a real person's identity to commit fraud.

First-party fraud is also widespread in the auto industry. Eight in 10 fraud cases in the auto industry are first-party instances, where people lie about their income or misrepresent financial statements for a car loan, Equifax application data suggests.

The report suggested the proportion of identity fraud in auto applications has doubled since 2019, with secured lending institutions especially vulnerable to these attacks.

Canadians also feel they may be paying a higher price for auto insurance because of growing fraud, the survey shows.

About 74 per cent of respondents believe insurance fraud impacts their car insurance premiums.

"Overall, fraud impacts premiums and we're seeing a lot of theft in cars (and) that does impact the insurers," said Prince.

Prince says the cost of the increased number of insurance claims eventually gets passed down to consumers.

The survey questioned 1,614 Canadians aged 18 to 65 between Feb. 2 and Feb. 4 online in partnership with Leger. The survey carries a margin of error of +/- 2.5 per cent, 19 times out of 20.

Prince said lenders and businesses need to be more careful to avoid fraudsters.

She suggested lenders follow market trends to strengthen their internal strategies and look closer at red flags among applicants.

"Anything that may propose a certain level of risk, take a closer look and validate that information immediately," she said. "I would also recommend going beyond simply trusting that the document you've received or the information you've received in the application is 100 per cent correct."

Validating information would include verifying income and employment among other measures.

This report by The Canadian Press was first published Feb. 27, 2024.

 

Ottawa freezes merger notification threshold, funds housing innovation projects

Nojoud Al Mallees, The Canadian Press

Ottawa is freezing the threshold at which the Competition Bureau must be notified of a merger. 

The federal Liberal government is also providing $123 million to eight homebuilders it says are driving innovation and will help build more than 5,000 affordable homes.

The announcements came Tuesday during Finance Minister Chrystia Freeland's weekly economic update alongside other ministers.

Federal law requires that mergers that exceed a certain value are flagged to the Competition Bureau in advance so it can assess the potential impact.

Ottawa says the amount usually increases along with gross domestic product — but instead, it will be frozen at $93 million, the threshold since 2021. 

Had the threshold been increased at the rate of economic growth, the federal government says it would have been around $120 million by now. 

The home funding is being allocated through the Affordable Housing Innovation Fund, which finances rent-to-own schemes and other innovative projects.

Housing Minister Sean Fraser outlined some of the projects targeted for support, including ones focused on modular housing and lower energy costs. 

This report by The Canadian Press was first published Feb. 27, 2024.

 

Cape Breton U tripled its international recruitment. Students say they pay the price.

Sarah Smellie, The Canadian Press

Over the past five years, Navy Nguyen says she has watched thousands of international students arrive at Cape Breton University to find a town that was wholly unprepared for them.

From 2019 to 2020, the school more than tripled its efforts to recruit international students, before being forced to scale back as incoming students couldn't find anywhere to live or work, and services such as public transportation were swamped.

Nguyen said the situation set up international students to bear the brunt of these failures, and then to be blamed for them, all while they were paying more than double the fees a Canadian student pays.

"We were recruited into this situation that we did not cause," Nguyen, 24, said in an interview. 

"We all moved here because we want a better life, we want a better education, we want a better outcome," she added. "It's possible. I'm definitely a better version of myself, but it comes with so much cost."

Federal Immigration Minister Marc Miller announced last month that new visas for international students would be cut by more than one-third this year, a move presented in part as a way to alleviate pressure on housing. Students say that rather than capping international study admissions, governments should address the systemic problems the high number of admissions exposed.

Figures obtained through access to information legislation show that in 2018, Cape Breton University hired 53 agents to recruit international students. The next year, that number leapt to 142, and then in 2020 it hit 179. The school cut back to 102 recruitment agents in 2021, and then to 70 and 53 in the following years.

In 2018, the year Nguyen arrived from Vietnam, there were 1,982 full-time international students at the school, making up 48 per cent of the university's population, figures from the Association of Atlantic Universities show. Now, there are nearly 7,000 international students at the school, three-quarters of the university's population.

That's more than a fifth of the entire population of Sydney, N.S., the coastal community where the university is located.

The university doubled its revenue in that time, from $69.1 million in 2018 to $139.5 million last year, according to financial statements available online. International students pay around $20,000 each year in tuition and fees at the school.

Nguyen said the community quickly became strained as more students arrived. Jobs became scarce and students crowded into rentals, many of which were in need of repair. CBC News reported that Rajesh Gollapudi, a business analytics student at the school, died in a fire in 2022 in a house he shared with seven other people. Court documents show the landlords have been charged with several fire safety infractions, and they are scheduled to enter a plea in March in provincial court.

Public buses between Cape Breton towns became packed with students, who had to live farther away and plan their days around sporadic rural bus schedules and long commutes, Nguyen said. Some live in their cars because they can't find housing, or they live in Halifax and make the long drive to Cape Breton.

They face racism and xenophobia from some, she said, but others see the young, educated people breathing life into a region known for its aging population.

Seventy-six-year-old Murdoch Moore and his 69-year-old wife, Lynn, have grown close with several international students and their families. When the couple's home near Sydney was buried during a massive snowstorm this month, their international student friends shovelled out him and many of his neighbours, Moore said in a recent interview.

“I consider the international students that have come here for the last five-plus years to be a great asset and blessing to the area,” Moore said. "They're taking our jobs? If I hear that once more, I'll go ballistic." Rather, he said, they're building lives in the region and using their education to fill essential roles, particularly in health care.

Omon Iyoriobhe is doing a health-care internship in Halifax, and he's set to graduate from Cape Breton University in May. He said he was shocked to find rent cheaper in Halifax than in Cape Breton, where he paid $650 for a room in a house with seven other people.

The 28-year-old from Nigeria worries the federal government's two-year cap on study permits for international students is a blanket measure that doesn't recognize the nuances of Cape Breton, or the university's efforts to reduce overseas recruitment and build new student housing.

There is a "symbiotic" relationship between international students and their community, as they get Canadian educations while offering an economic boost to a struggling region, he said.

"These students definitely bring a lot to the system," Iyoriobhe said. "Trust me, that's why the government opened the borders in the first place."

For Nguyen, adequate government support for post-secondary education would ensure schools don't have to use international students as "cash cows." She has volunteered and worked with non-profits in the five and a half years she has been living in the region, and she hopes to continue that work after she graduates in May.

"I can see myself working ... to further develop the community," she said.

This report by The Canadian Press was first published Feb. 27, 2024.

 

Apple cancels work on electric car, shifts team to generative AI

Mark Gurman, Bloomberg News

(Bloomberg) -- Apple Inc. is canceling a decadelong effort to build an electric car, according to people with knowledge of the matter, abandoning one of the most ambitious projects in the history of the company.

Apple made the disclosure internally Tuesday, surprising the nearly 2,000 employees working on the project, said the people, who asked not to be identified because the announcement wasn’t public. The decision was shared by Chief Operating Officer Jeff Williams and Kevin Lynch, a vice president in charge of the effort, according to the people. 

The two executives told staffers that the project will begin winding down and that many employees on the car team — known as the Special Projects Group, or SPG — will be shifted to the artificial intelligence division under executive John Giannandrea. Those employees will focus on generative AI projects, an increasingly key priority for the company.

Listen to the Big Take podcast on iHeart, Apple Podcasts, Spotify and the Bloomberg Terminal. Read the transcript.

The Apple car team also has several hundred hardware engineers and vehicle designers. It’s possible they will be able to apply for jobs on other Apple teams. There will be layoffs, but it’s unclear how many.

Apple, based in Cupertino, California, declined to comment.

The move came as a relief to investors, who sent Apple shares climbing Tuesday after Bloomberg reported the news. The stock was up about 1% at $182.63 by the close in New York.

Elon Musk, head of Tesla Inc., also celebrated the move. He shared a post on the X social media site with a saluting emoji and a cigarette.

The decision to ultimately wind down the project is a bombshell for the company, ending a multibillion-dollar effort called Project Titan that would have vaulted Apple into a whole new industry. The tech giant started working on a car around 2014, setting its sights on a fully autonomous electric vehicle with a limousine-like interior and voice-guided navigation. 

But the project struggled nearly from the start, with Apple changing the team’s leadership and strategy several times. Lynch and Williams took charge of the undertaking a few years ago — following the departure of Doug Field, now a senior executive at Ford Motor Co. 

Apple was still years away from producing a car and contemplated many different designs. Beyond the look of the vehicle, cracking self-driving technology was a major challenge. Apple had road-tested its system since 2017 using a Lexus SUV exterior, putting dozens of vehicles on roads in the US. The company also tested more secretive components on a gigantic track in Phoenix that was once owned by Chrysler.

In the end, Apple was facing a cooling market for EVs. Sales growth lost steam in recent months after high prices and a lack of charging infrastructure discouraged mainstream buyers from shifting to all-electric vehicles. General Motors Co. and Ford are pivoting to producing more hybrid vehicles after confronting lackluster EV demand and manufacturing bottlenecks, and automakers across the industry are slashing battery-electric car prices, production targets and profit forecasts.

Even Tesla, the pioneer of the EV revolution in the US, has warned its rate of expansion will be “notably lower” this year. Domestic EV sales growth will decelerate to 11% this year from an estimated 47% growth rate in 2023, according to a forecast by UBS AG.

Read More: Electric Vehicle Sales Growth Is Slowing. Here’s Why: QuickTake

Apple’s most senior executives finalized the decision in recent weeks, according to the people. It comes just a month after Bloomberg News reported that the project reached a make-or-break point. The most recent approach discussed internally was delaying a car release until 2028 and reducing self-driving specifications from Level 4 to Level 2+ technology. Apple had employees from across the car industry working on the project, including designers from Aston Martin, Lamborghini, BMW and Porsche.

Under the new arrangement, Lynch will report to Giannandrea. He previously reported to Williams, who also has overseen software engineering for the Apple Watch.

Apple once envisioned creating a car without a steering wheel and pedals, but it scrapped that notion earlier. The company also spent time working on a remote command center that could take over for a driver. 

Most recently, Apple had imagined the car being priced at around $100,000. But executives were concerned about the vehicle being able to provide the profit margins that Apple typically enjoys on its products. The company’s board was also concerned about continuing to spend hundreds of millions of dollars a year on a project that may never see the light of day.

Apple continues to invest heavily in other areas. The company spent $113 billion on total research and development over the past five years, with an average annual growth rate of about 16%. The company also recently launched the Vision Pro headset — its first new product category in almost a decade — and has built up that business.

The company has scrapped projects before, including a plan to make a TV set that was abandoned around 2015. But few endeavors have lasted this long, involved so many employees or wracked up billions of dollars in expenses. 

Read this next: Biden’s EV Dreams Are a Nightmare for Tesla and the US Car Industry

So far, Apple’s biggest push into the auto industry was its CarPlay software, which lets drivers access iPhone features like maps and Siri. It’s being redesigned to integrate more deeply with vehicle controls and entertainment systems. By not competing with automakers, Apple could give a boost to that software, helping spread it to more models.

Ultimately, focusing on AI may be a better bet, Bloomberg Intelligence analysts Anurag Rana and Andrew Girard said in a note. “Apple’s decision to abandon electric cars and shift resources toward generative AI is a good strategic move, we believe, given the long-term profitability potential of AI revenue streams versus cars.”

--With assistance from Gabrielle Coppola.

(A previous version of the story corrected the timing of an EV forecast.)

©2024 Bloomberg L.P.

 

Proposed Quebec language rules will lead to fewer products, higher prices: lawyer

The Canadian Press

A General Electric washer sits inside a retailer, Friday, Sept. 15, 2023, in Marietta, Ga. (AP Photo/Mike Stewart)

Appliance manufactures and a Montreal lawyer say proposed Quebec language regulations will lead to fewer choices and higher costs for products like home appliances.

The draft regulations released last month require manufacturers to translate into French all permanent markings on appliances that are necessary for the use of the products.

Under current law, permanent markings, such as those that are engraved on or welded to appliances, don't have to be in French unless they're related to safety.

The Association of Home Appliance Manufacturers says the vast majority of appliances on the market aren't compliant with the new rules.

Eliane Ellbogen, a Montreal-based intellectual property lawyer with law firm Fasken, says the rules would enter into effect 15 days after they are adopted, making them virtually impossible to comply with in time.

She says the proposed rules could lead to delays and higher costs as manufacturers replace their current offerings with compliant products, adding that some of her clients are planning to pull out of Quebec entirely.

A spokesman for French Language Minister Jean-François Roberge says the percentage of appliances with French-language markings has been steadily declining since the 1970s and that in other countries, manufacturers sell products with markings in the local language.

This report by The Canadian Press was first published Feb. 27, 2024.

 

Why do so many discount airlines fold? Lynx Air is latest in a line of failures

Christopher Reynolds, The Canadian Press

Lynx Air ceased to fly this week, the latest in a long line of discount carriers to bite the departures dust — brought down in part by stiff competition, high fees and Canada’s vast geography.

Lynx, which filed for creditor protection Thursday, marks at least the eighth budget airline to take off and then fizzle out since 2000, joining the ranks of Roots Air, CanJet and Swoop.

Most failed to clear the same barriers that have blocked the runway for decades.

Despite increased competition, Air Canada and WestJet continue to dominate the marketplace with more than three-quarters of seat capacity among national airlines. The veterans have deeper pockets than young upstarts, allowing them to more easily match ticket prices in a race to the bottom.

"There's a fundamental issue with how the dynamics of competition work in the Canadian marketplace," said John Gradek, who teaches aviation management at McGill University.

"The duopoly that we have in Canada is allowed to take on these discount carriers aggressively and use their competitive power to basically drive these carriers into bankruptcy."

Other industry observers have suggested the Canadian market has trouble supporting more than two large national carriers, though Porter Airlines aims to become an exception as it undergoes a rapid expansion from regional player to continental airline. The Toronto-based company aims to grow its fleet to 79 planes — nearly two-thirds of them jetliners — by 2025, up from 29 turboprops in 2022.

"If you look at history for the past 30 years, other than WestJet, there have not been that many successful ventures," noted Jacques Roy, a professor of transport management at HEC Montreal business school.

High fees and incumbent perks at large airports can work against newer airlines. Lynx, which launched its first flight in April 2022, pointed to rising costs and airport charges as among the culprits behind its demise.

Canada has high "airport improvement fees" relative to other countries, though that's partly because airports are non-profit entities that receive much less federal funding than those in the U.S., for example. Indeed, Ottawa took in more than $400 million in "ground rent" for airports' use of federal land in 2022-23, basing the annual tally on their revenues.

The fees, which are the same for both big and small airlines, raise the base price of a ticket, potentially deterring fliers with less disposable income — a key customer pool for discount carriers.

"They don't rely on their business model to steal traffic from WestJet or Air Canada," said Robert Kokonis, president of consulting firm AirTrav Inc. "They bring affordable travel to the folks that either never travel by air or who perhaps would like to travel more frequently if the price were were right.

"But when your starting point to stimulate the market is already so much higher because of the sum of all these taxes, fees and charges, it's very, very difficult to offer a price point that targets and fits the needs of that demographic," he said.

In Toronto, Pearson's airport improvement fee on a no-frills, one-way Flair Airlines flight booked this week between Toronto and Vancouver for March amounts to $35, or 25 per cent of the $139 ticket (most U.S. airports charge US$4.50). Taxes make up another $16 of that total, on top of a $7 security charge.

However, Canadian Airports Council president Monette Pasher said the improvement fees are comparable to large European airports such as Frankfurt in Germany and Heathrow in London that also operate under a user-pay regime. She called on the government to try "tweaking the model" by reinvesting the ground rent it collects in airport infrastructure.

The seasonal nature of air travel in Canada also results in a financial roller-coaster where new companies with less free cash flow struggle to hold on.

"The old saying is that if you want to become a millionaire, you start by becoming a billionaire — then you buy an airline," said Roy.

A lack of big, secondary airports in large cities can also force smaller airlines to bid for higher-priced slots at Pearson and Montreal's Trudeau airport. Executives have long complained about amounts charged for gate and apron use and landing fees as well as federal agency expenses such as security screening and air navigation.

However, airports' "aeronautical fees" are largely in line with global rates, said Pasher. And they have fallen by 10 per cent in real terms since 2007, rather than keeping pace with inflation.

"Canadian Airports Council research has found that even taken together, these fees (including airport improvement fees) represent just 12 per cent of the average Canadian airfare – less than most of the fees ultra-low-cost carriers and other airlines charge for the most basic provision of services, such as check-in, seat selection and baggage charges," Pasher said in an email.

That still leaves the age-old problem of a vast, sparsely populated geography that creates unique challenges for all carriers in Canada, but especially those struggling to get off the ground.

"The original model — Southwest or JetBlue in the U.S. — you basically offer point to point services between relatively large cities and markets and over relatively short distances," Roy said. The goal is to squeeze more revenue out of each plane with multiple trips per day and lower fuel costs, with customers able to endure the tight quarters due to the quicker trips.

"But in Canada, there's only a small number of such original destination pairs. And it's a market that is already occupied by major players like Air Canada and WestJet," Roy said.

“Even if you have deep pockets, how much are prepared to lose? How fast are you prepared to become a millionaire?”

This report by The Canadian Press was first published Feb. 27, 2024.

 

Lowe's sales suffer as home improvement slowdown persists

Jamie Nimmo and Olivia Rockeman, Bloomberg News

Lowe’s Cos. said its sales will fall further this year as consumers continue to hold off from sprucing up their homes amid higher mortgage rates and a drop in new construction projects.

Inflation and a stagnant housing market have made DIY customers “hesitant to spend on big-ticket purchases for their homes,” Chief Executive Officer Marvin Ellison told analysts on a Tuesday earnings call. “Those that did engage in home improvement activities took on smaller, non-discretionary projects with a heightened focus on value,” he said. 

The spending shift hit demand for items for the kitchen and bathroom, as well as for flooring and appliances. Lowe’s is focused on rolling out its new DIY loyalty program to boost traffic and revenue in store and online, Ellison said. 

Comparable sales for the current fiscal year will be down between 2 per cent and 3 per cent, a slightly larger dip than analysts were expecting, the retailer said Tuesday. Lowe’s saw like-for-like sales fall 6.2 per cent for the fourth quarter, though analysts were expecting an even worse performance. Shares rose less than 1 per cent at the market open on Tuesday in New York. 

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The most recent U.S. housing data has shown some improvement in sales of new and existing homes, but still-high borrowing costs mean that residential real estate activity is muted compared with a year ago. 

While home sales aren’t a direct indicator of Lowe’s sales, new purchases often fuel demand for home construction projects. Home owners who take on improvement projects make up about 75 per cent of Lowe’s sales. 

In November, Lowe’s cut its full-year forecast, citing fewer purchases of big-ticket items and a slowdown in spending by DIY customers. 

Total sales for the fourth quarter fell to US$18.6 billion, from $22.4 billion for the same period in the prior year. Earnings per share were $1.77, better than expected for the quarter.