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Thebean last won the day on July 14 2015

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  1. What's conveniently forgotten is that as the dominant carrier, AC could not lead on any pricing initiatives, even though they were, and continue to be desperate for revenue. 

    It would have been PR suicide and they know it.  

    WJ did a AC a huge favor by leading the luggage charge initiatives.  

    The difference between WJ matching New Leaf today and AC matching WJ 20 years ago is that WJ has been consistently profitable operating at these sorts of fare levels. 

    20 years ago, AC was regularly losing $150m a quarter or more, yet attempted to argue to the Competion Tribunal that they could profitably match WJ's fares. It was bullshit and everyone knew it.

    Their bankruptcy in 2003 pretty much put that argument to rest, regardless of the testimony of various egghead economists discussing the concept of "beyond revenue" ad nauseum.

    I wouldn't be at all surprised if New Leaf ran into different CTA issues  again.  They have very little capital and are attempting to cash flow the business.  That may work briefly, but they'll see a cliff around Aug 15 as post Labor Day bookings start to dominate. 

    What little cash they have ultimately comes from investors of Iranian descent based in Minneapolis.  I hear it's being channeled thru a Native Band in Manitoba, but it's US sourced and they are more than likely offside on the 25% foreign ownership regs, which will be applied to whoever takes the commercial risk. The strategy, as explained to me by some US folks who passed on the deal is to play the "aboriginal sympathy card" to the CTA. It won't work. Rules are rules for all.  Until the GoC raise foreign ownership limits for all, I suspect this dodo won't fly.  

    Flair is Cdn owned and controlled, but they are taking no commercial risk.

    Besides , their route network is retarded.  Some of their flying is so stupid, it defies belief.  

    Stay tuned.....






  2. 4Q 2015

    AC Revenues:     $3.182m

    Expenses:            $3.024m

    Interest Expense:  $112m

    Operating Earnings: $46m

    Operating Margin: 1.45%


    WJ Revenues:     $958.7m

    Expenses:            $846.0m

    Interest Expense:  $12.9m

    Operating Earnings: $99.7m

    Operating Margin:  10.4%


    North American Industry

    Revenues:          $42.8m

    Expenses:            $36.6m

    Interest Expense:  $736m

    Operating Earnings: $5.4b

    Operating Margin:  12.63%


  3. They tried to raise the price to $1.31 in YLW the other day. Hmm. Oil is $50 a bbl. Call it $65 Cdn a bbl. And gas is priced close to when it was $100 a bbl? Canadians acquiesce to this sort of stuff far more readily than Americans.
  4. But two weeks after the last of the other publicly traded airlines report? What is it about AIr Canada that takes them so long to report? Is their business that much more complex than, say, UAL, AA or Delta? This has to be about the latest they've ever reported 2q numbers.
  5. Ben Cherniavsky at Raymond James did a detailed report in 2014 that quantified the revenue loss that could be expected by AC and Porter as WJ expanded into Porter's safe harbors. It did not paint a pretty picture.
  6. I'm pretty sure AC issued a similar release over that weekend. Edit: I stand corrected. It was the following year: Air Canada Achieves Single Day Record for Customers Carried Nearly 138,000 customers expected to board Air Canada aircraft to start summer season MONTREAL, June 27, 2014 /CNW Telbec/ - Air Canada today said it achieved a single-day record for passengers carried, with nearly 138,000 customers boarding its aircraft around the world. It'd be hard for AC to carry more passengers on any given day in the winter over the summer. They park close to 20% of their asm capacity in 4Q and 1Q. I would imagine there are considerably more seats available between YWG and YYC on the dates in question. Anyone familiar with rms systems knows how the algorithms work when flights are anticipated to sell out. Now, if the flights to Brandon were empty and the fares remained stubbornly high, I could see your point. Porter and others fly countless transborder flights with loads well below 60%, but manage to keep going by ensuring that the key o&d traffic pays dearly for the all important close in bookings, with base fares often 8 to 9x those of advance purchase fares. The question becomes, what happens to route economics when close in fares are reduced to 3-4x advance purchase fares. That's what happened in New York after WJ arrived. It's a rhetorical question. It's obvious what happens and it isn't a pretty picture. The fact that WJ is doubling capacity to YBR should keep fares on anything but hyper peak days within reason. WestJet sets new single-day traffic record Airline tops 60,000 for the first time in its history CALGARY, Aug. 1, 2013 /CNW/ - WestJet today announced it flew 60,441 guests on Wednesday, July 31, 2013, setting a new single-day record for guests travelling with the airline. The previous single-day record was 57,474, set December 21, 2012. "As we approach the August long weekend, we thank our guests for choosing to fly with us in record numbers," said Bob Cummings, WestJet Executive Vice-President, Sales, Marketing and Guest Experience. "As we continue to develop our expanding network, introduce new products and appeal to new travel segments, we are seeing significant growth in the number of new WestJet guests we are welcoming on board - including business travellers and foreign guests flying with us as a result of our nearly three dozen airline partnerships around the world. We are proud to introduce more guests to the caring service for which our WestJetters are known." WestJet expects near-record numbers each day through the upcoming long weekend.
  7. It shouldn't come as a huge surprise that flights are full during the week leading up to the busiest travel weekend thus far this year. High demand, not enough capacity. That's why WJ is going to double dailies.$834 one way to Boston from Toronto tomorrow and $1,302 for a fully refundable fare whether flown tomorrow or next March. Yikes. Yields on Boston are going to plummet, turning a nice profit center into yet another underperforming route for incumbent operators. It's always nice to have markets like Boston whose profits underwrite all sorts of other underperforming routes. I'd like to see BOS - YHZ do well, but it strikes me as a bit of an odd duck, unless Delta / AA code share traffic fills a lot of seat. There's not a lot of feed traffic available over YHZ. By my rough count, the three new U.S. destinations announced out of YYZ today will cause pricing to collapse on a further 96 city pairs. In WJ's case 100% of their domestic feed to BOS, SRQ and PBI is low cost. Virtually all the domestic feed on incumbent YYZ-BOS, SRQ and PBI flights is of the high cost variety. Until Rouge takes over all domestic flying, the advantage is squarely in WJ's corner. I wonder how that scenario would play out with mainline pilots and f/a's?
  8. And one daily flight becomes two. Were I a betting man, I'd bet you'll see 3x daily within a few years. Slow, steady growth and avoid the temptation to "grow into profitability", a strategy that has befuddled countless airlines in the past and even today. Paging Mike the White.......
  9. I don't see the introduction of 5 wide bodies, fed by a network operated by about 130 narrow bodies to be a particularly risky strategy. It's pretty tempting to declare "problem solved!" when jet fuel is 70 cents a liter. Let's see what things look like after a year of $1 a liter fuel.
  10. Naturally, the two stories are related....... Gotta love the media, eh?
  11. A valid observation. I prefer companies that make decisions for long term strategic benefits rather than near instant gratification and reward. I also tend to generally agree with Ben's latest assessment: https://raymondjames.bluematrix.com/sellside/EmailDocViewer?encrypt=f7d8cf92-807f-4a17-bcff-c56e2b0fdfe3&mime=pdf&co=RaymondJames&id=ben.cherniavsky@raymondjames.ca&source=mail
  12. Had the order been for 60 wide bodies to add to the existing wide body fleet, I suspect the vote would have gone a little differently.
  13. Moving the dial on asl is not easy to do, and even harder to do with a larger fleet. WJ has added about 20 Q400's in the last few years operating an asl of under 350 miles. and by doing so, stretched out the flying done by the 737 fleet. In the period, the ASL hasn't changed much, just 66 miles. In 1q 2013, the fleet was 103 aircraft with an asl of 1037 miles In 1q 2015, the fleet was 126 aircraft with an asl of 971 miles. The larger question is why would any airline choose to calculate a key comparative metric differently than the rest of the industry, and then publicize it as being an accurate comparable to others? Having higher costs than other airlines is one thing, but having higher costs on a shorter average stage length would certainly and significantly mitigate that discrepancy, provided the asl was accurately calculated in a manner consistent with the rest of the industry. Any analyst worth his or her salt is going to stage length adjust casm to provide a true picture of the casm differential between various airlines. This, however, requires an accurate asl calculation, usually provided by the airline, as some airlines, no names mentioned, withhold a key data piece that makes it impossible to precisely calculate asl. As strategies change, and some metrics that are carefully watched by external observers exhibit significant change, oh, let's say for the sake of discussion, yield per rpm, a simple solution is to explain it away as being the result of a longer asl being flown, ( or, in the opposite instance, shorter asl being flown). When metrics are calculated consistently with the same methodology as all other reporting airlines in the same geographic zone, ie North America, accurate comps between airlines can be made. If key data is calculated differently by some, or not provided at all, (Jazz/Chorus is the only publicly traded airline that does not provide rpm data), it makes the comps irrelevant, regardless of, at least on the surface, how good they look. That is why it is often a good idea to take a more critical, independent look at things, instead of relying on what is spoon fed to the masses.
  14. Dag, you are smart enough to do the math yourself rather than have things spoon fed to you. Take the delta in the fuel price per liter, multiply that by the total liters of fuel consumed and there's the yoy savings achieved by the collapse in fuel prices. If one is to believe everything at face value, perhaps someone could explain how the ASL grew from 832 miles to 1,496 miles in just a year? http://www.aircanada.com/en/about/investor/documents/2014_MDA_q1.pdf Page 1 http://www.aircanada.com/en/about/investor/documents/2015_MDA_q1.pdf Page 1 That sort of increase is unknown in the annals of modern airline history. Then again, there are many in the industry who had been calculating the real asl for many years on the industry standard basis of asm's / # of departures / weighted average seats per departure and were well aware the 832 mile number was pure fiction. The far more interesting question is why the methodology was used in the first place. Why would an airline want to understate its ASL? I can think of a few good reasons.....
  15. Dag, you might want to check your math. AC paid 94.7 cents a liter for fuel in 1Q 2014 and 66.3 cents in 1Q 2015, a difference of 28.4 cents a liter. The company purchased 1.039b liters of fuel in 1Q 2015. The fuel saving in 1Q was $295,076,000. The yoy operating line improvement was $262m, and considerably less if interest is included as an expense. When you are the beneficiary of that sort of windfall, it would be almost impossible NOT to show tremendous YOY improvement. However, it's a big stretch to chalk up that sort of YOY improvement as an indication of any sort of strategic success. It's the result of cheap fuel, plain and simple.
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