Thebean

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Everything posted by Thebean

  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.
  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 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
  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 an
  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 succe
  16. If they don't conjure up ways to spend money, they are out of their nice, high paying jobs, with tons of boondoggle travel opportunities. It's a self full fulling prophecy. Keep building and keep raising the aif.
  17. Don't think for a second they didn't try, at all kinds of levels. Oh, the stories that could be told...... The problem was WJ had a 40% cost advantage over both of them. Even today, the advantage is in the upper 20% to low 30% range, depending on seasonality. As expected, as they matched the low fares, the markets expanded to the point where everyone was filling all their capacity, but only WJ was making money doing so. The more capacity they added, the more money they lost. One of the two airlines made a presentation to their own Board of Directors documenting how their margins in western
  18. A first year economics student could create a presentation with a day's research and have this case thrown out of court in about 20 minutes. Complete and utter nonsense.
  19. I guess we'll see where things stack up in a month or so, eh? With fuel at current prices, it isn't difficult for airline management to look like geniuses. Fuel dropping from 92 cents to about 69 cents a liter should account for something in the order of a $240m improvement in AC's YOY numbers. It's nice, but it's not evidence of anything except of impact of temporarily cheap oil prices that everyone is enjoying more or less equally. The problem, at least for a few, is that some may actually start believing their own fertilizer, the endless curse of the industry. Mañana, mañana......
  20. Utter nonsense. Bandwagon jumpers.
  21. Lest anyone forget, the company is expecting record profits this quarter. WJ offered up some transparent guidance to the market this week. Should that guidance be industry wide, and I suspect it will be, and one company chose not to offer up the same reality check, that will provide the market with strong evidence of what's driving the stock: the promise of endless sunshine. Caveat emptor. Sheep tend to follow the herd.....
  22. There was a time, say, 20 years ago, when outlet malls offered legitimate savings. Now, they seem to offer substandard versions of the core product they originally were known for at a mild discount and offer a very questionable value proposition. Interestingly, it is rare to see an Outlet Mall within walking distance of where the core brand is being sold. Why sell cheap, discount Louis Vuitton bags when the real thing, with much higher margins, is being sold nearby. If the discount branded Louis Vuitton bags are being sold like lemonade at a temperance picnic, demand for the real thing wi
  23. All good, providing it doesn't canibalize existing service.
  24. For the benefit of the ostriches, the point is the second line of the post. It will become apparent towards the end of the first week of August. Nothing happens in isolation.